It's not over when the offer is issued. Your Conveyancer still has work to do.
See below the stages of your mortgage offer.
Decision in Principle
This means you appear to meet the lender’s criteria for your chosen product and they “should” be able to offer you a mortgage. This is not guaranteed. They run checks.
Lender Valuation by Appointed Valuer
Often a desktop or drive by to ensure the property chosen offers good security and the price agreed is not over, or under, current market value. You can only borrow a certain percentage of the property value. The property is also compared to similar properties locally.
A lender valuation is NOT detailed enough for the buyer to rely on and a Level 2 survey (minimum) should be obtained. This is often known as a Homebuyers Survey. A lender valuation is for the lender's use and is unlikely to pick up on any structural issues. You will be unable to rely on it as you are not the valuer’s client. The lender is the client. The lender’s valuation can take weeks to finalise. As can the buyer’s survey.
Your conveyancer needs sight of both valuation and survey. The Conveyancer cannot comment on the property’s physical condition but will need to review the survey section titled "Issues For Your Legal Advisor". This will tie in with the title check they are carrying out.
Issue of Mortgage Offer
Following your lender’s review of your mortgage application, your payslips, P60s and a llinformation you provided they will hopefully issue you with a full mortgage offer. The offer is issued to borrower (and broker) and a separate copy is issued to your Conveyancer. This step can take weeks.
Conveyancer Copy
This differs from your copy and the conveyancer MUST wait for their copy. They cannot use the borrower/broker version. Conveyancers check the offer for any discrepancies and report back to the lender if any are found. This is called a lender referral. Conveyancers are required to do this as part of the lender’s panel membership and terms and conditions.
Lender Referrals
The Conveyancer reports the issue to your lender and waits for their response. The Underwriter takes a view as to whether there is a security issue and if the mortgage can proceed. A response can take some time. In some circumstances the mortgage offer may need to be amended and reissued. To avoid a referral, make sure no errors are contained in the application forms. Ensure you advise your broker and Conveyancer about issues such as cash gifts or adult occupiers.
A lender referral is also needed when there is a title defect in the seller's deeds. This is likely to affect the lender 's security. Their monies are at risk so they are entitled to be notified. It takes time for the lender to respond. This may be up to 10 working days.
Change of Circumstances
If your circumstances change after submitting the application forms you are required to tell the lender. For example, where you lose your job or your income or expenses change. You will breach the lender’s terms if you do not inform them. The lender may withdraw the offer or amend it. Discovery after completion, where this was kept from the lender, could prompt repossession or court proceedings as they would not have released the mortgage advance had they been aware of the circumstances.
Signing the Mortgage Deed
Having a mortgage offer issued does not mean the conveyancing process has concluded. Your Conveyancer may still be dealing with searches and enquiries with the other side. You also need to sign (in the presence of an independent witness) the mortgage deed and return the original to your Conveyancer. Do NOT have a family member or partner witness the Deed. It will invalidate the mortgage deed. Adult Occupiers must also sign a separate Lender Consent / Waiver Form. This is a mortgage condition.
Requesting Funds
After the offer is issued you are still NOT guaranteed the mortgage advance. Your Convrysncer will need to apply for the funds, give the lender 3-5 working days' notice, and certify that there are no discrepancies and NO title defects.
Conveyancers then wait for lender confirmation of release of monies before proceeding to exchange and complete. If your lender’s valuation or credit checks have expired the lender will not release funds. To protect you the Conveyancer checks the funds will be released. If you had exchanged and on the day of completion the lender does not release funds that puts you in breach of contract. Compensation is then due.
If your lender releases the money too late on the completion date, and the banking system has closed for the day, then your Conveyancer cannot complete and you are in breach of contract and other parties may claim compensation. To avoid this Conveyancers usually draw funds down the day before completion. You will pay daily interest from the point of release of mortgage funds.
As with most of the conveyancing process, what seems simple from the outside, hides a complex process. A system designed to protect you from breach of contract and/or suffering financial loss. It can seem like a series of never ending hurdles but they are there for good reason and to protect you.
Mortgage Expiry, Getting Extensions & Offers Being Pulled
Your mortgage offer will state its expiry date. If this is rapidly approaching you can request an extension. There is no guarantee of success. This is at the lender's discretion. If there are extenuating circumstances, or there will be financial distress if the offer expires, you should communicate this to the lender. You can do this via your Conveyancer and your mortgage broker.
NB: No mortgage funds are NOT guaranteed until completion occurs. Your lender can revoke the mortgage offer at any time.
They are entitled to do this where:
Your circumstances have changed since the mortgage application was made.
They discover errors, or worse, false information was given in the application.
A title defect or structural issue becomes apparent, and they no longer consider the purchase property to be good security for the loan.
The lender changes its lending criteria due to financial markets and interest rates.
Until completion occurs, and you have drawn down and used the mortgage advance, the mortgage offer can be withdrawn by the lender and funds are no longer available up you.
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