Getting a mortgage offer is a major step towards buying a home. It can feel like the hardest part of the process is over. However, a mortgage offer is not always guaranteed until the mortgage completes.
Mortgage completion is the date on which the lender releases the mortgage funds and the mortgage transaction becomes legally effective, whether for a property purchase, remortgage, additional borrowing, or possibly another change to the mortgage.
Many buyers are surprised to learn that mortgage offers can sometimes be withdrawn.
We take a look at when this can happen and what you can do about it.
Can a mortgage offer be withdrawn before completion?
Yes. A lender can withdraw a mortgage offer before completion.
This is not common, but it does happen. Mortgage offers are based on the information available when the applicant/s applied. If something changes before the mortgage completes, the lender may review its decision.
Why would a mortgage offer be withdrawn?
There are several reasons why a lender may withdraw an offer.
Changes to your financial situation – Lenders assess your income, spending and debts before approving a mortgage. If your circumstances change, the lender may decide you no longer meet its lending criteria. These changes could range from losing your job to taking on new debt.
Problems with your credit report – Your credit file can change between mortgage offer and completion. If you miss payments, default on credit agreements or take out large amounts of new borrowing, this could affect the lender’s decision. Even applying for several new credit accounts can raise concerns.
Incorrect or misleading information – A mortgage offer is based on the information provided in the application. If the lender discovers that information was inaccurate or incomplete, the offer could be withdrawn. This could include incorrect income details, false employment information, or missing information about financial commitments.
Issues with the property – Sometimes the problem is not the borrower but the property itself. A lender may withdraw an offer if serious structural issues are discovered, the valuation changes significantly, or if legal problems are identified during conveyancing.
Can a mortgage offer be withdrawn after exchange of contracts?
This is rare but not impossible. Most mortgage offers remain valid after exchange and until completion, provided nothing significant changes.
However, if a lender discovers serious issues such as mortgage fraud or a major change in circumstances, it may still take action. This can leave buyers in a difficult position because they are legally committed to complete the purchase after exchange.
If this situation arises, you should seek specialist legal and mortgage advice immediately.
Can a mortgage offer be withdrawn after completion?
No. Once your mortgage has completed and the funds have been released to purchase your property, the mortgage offer cannot be withdrawn. At this stage, the offer has been fulfilled and replaced by a legally binding mortgage agreement between you and your lender.
However, it’s important to remember that completion is the point of no return. Before completion, a lender can still withdraw a mortgage offer in some of the circumstances we’ve just explored.
After completion, while your lender can’t withdraw the original mortgage offer, they can take action if you breach the terms of your mortgage agreement. An example of this would be failing to keep up with your repayments.
Can a mortgage offer be withdrawn if interest rates rise?
If you’ve already received a formal mortgage offer, your lender cannot withdraw an offer for this reason alone.
Mortgage offers are typically valid for a set period, and the lender is expected to honour the terms of that offer. Even if market conditions change during that time.
Lenders frequently pull their available mortgage products from the open market during rate increases, but this is different from revoking an already-issued formal offer.
How to reduce the risk of problems
There are steps you can take to protect your mortgage offer.
These include:
Be open and honest about your financial situation from the outset
Avoid taking out new credit before completion
Keep up with all loan and credit card payments
Inform your mortgage adviser of any changes in circumstances
Avoid changing jobs unless necessary
A mortgage offer is a significant milestone, but it is not always guaranteed until completion.
Remember, lenders can withdraw offers if your circumstances change, problems emerge with the property, or inaccurate information comes to light.
