What is a mortgage offer and what does it include? It can be a confusing time when making an offer on a new home. Our Conveyancing Team give you a breakdown of the process when making an offer and what it will include.
Mortgage In Principle
In order to avoid disappointment or delay when making an offer on your new home, you should consider applying for a mortgage in principle, as soon as you start looking for properties or even earlier. Starting the mortgage application before you start your property search enables you to find out how much you will be able to borrow so you can then focus your search on properties within your budget. A mortgage in principle may also give you an advantage over other potential buyers of the property you choose, and avoid any issues or delays when your offer is accepted.
Mortgage Offer
A mortgage offer is official confirmation that a bank or building society will lend you a set amount of money to buy or remortgage a particular property. To get a offer you will need to go through the mortgage application process and give the lender or your mortgage advisor/broker all the information it asks for. The lender will then carry out a full credit check or affordability assessment to decide whether it will lend you the money. The offer is property-specific, and the lender will carry out a property valuation to verify the property you are purchasing is adequate security for the loan. This may be by way of an actual inspection of the property, but may be a desktop valuation. You should not rely on lender valuations to check on the state and condition of the property and should always consider instructing your own home buyers report and valuation.
The mortgage offer will contain, the following:
- The borrower’s name(s)
- Address of the property being purchased
- The amount of the loan any special conditions attached to the offer (for example, not to let the property or any cash back payable on completion)
- The mortgage term interest rate and any fees
- The initial monthly payment amount
- Whether the mortgage is repayment or interest-only
- Rules about overpaying or underpaying the mortgage
- Information about early repayment charges
- Clauses about the lender’s rights to repossess the property if the mortgage is not paid
The date the mortgage offer issues will depend on the particular lender and how quickly it processes applications. An independent mortgage broker or advisor should be able to provide an indication of times for different lenders when you apply. The mortgage offer will state the date it expires.
If you are not ready to complete your purchase before your mortgage offer expires, you can ask the lender to extend it. Whether the offer can be extended or not depends on the lender and market conditions. If the offer cannot be extended, you will have to re-apply, which will incur additional fees and inevitably delay the conveyancing process. The terms and conditions of your mortgage offer will impose an obligation that you must inform the lender of any material change in your circumstances. These include losing your job, being made bankrupt or becoming seriously ill. This may result in your mortgage offer being withdrawn.
If you have any questions about this subject or any other aspect of buying or selling a property, contact us through our website, or call our Conveyancing Team and we’ll be happy to help you.