What happens if your mortgage offer is withdrawn?

When going through the property purchase journey, it’s important for all involved to understand the legal position in the unfortunate event they need to pull out. Whether you’re a buyer or seller, this could be down to choice or forced, such as issues with your mortgage offer. Unfortunately, a mortgage offer can be withdrawn by a provider at any time and for a whole host of different reasons.

We’ve put together this comprehensive guide so you can better understand your potential options if your mortgage offer is withdrawn or you’re considering pulling out of a house purchase.

Mortgage offer withdrawn

Although a mortgage and mortgage offer can go through without any issues, sometimes it isn’t the case and the mortgage offer is withdrawn by the provider.

Why would a mortgage lender withdraw your mortgage offer?

Mortgage lenders reserve the right to withdraw their mortgage offers. They can withdraw the offer beyond the point where contracts are exchanged, all the way up to the point of completion. When you receive a written mortgage offer, it will outline the reasons why the offer might one day be withdrawn. The most common reasons are as follows:

The mortgage offer has an expiry date – it’s only good for a certain amount of time, usually six months. So, if there are significant delays in the buying process, the lender can withdraw the offer.
If you provide incorrect or inaccurate information, the lender can withdraw the offer, and the same applies if they sense any kind of suspicious activity such as fraud.
The offer can also be withdrawn if a previously unknown problem with the property is found during the conveyancing and surveying processes. Flood risk is a common example.
Lenders sometimes conduct a deep dive credit check after granting a mortgage. If this unearths something negative that their initial credit check didn’t find, they can withdraw the offer.
If your personal circumstances change after the mortgage offer has been granted – a job loss, for example – the lender can change their mind.

What should I do if my mortgage offer is withdrawn?

First things first, don’t panic or make any rushed decisions. If you simply run to another lender and try to rush through another application, there’s a good chance the same problem will occur again, plus there’s the fact that mortgage rejections can have a negative effect on your credit score.

Your first course of action should be to speak to an independent mortgage adviser. They will outline all of the options open to you from different lenders and tell you how best to move forward. If you have a solicitor, it’s wise to speak to them, too, as they will be able to give you details about your legal situation.

Can a lender withdraw a mortgage offer after my sale has been completed?

No, they cannot. However, if you default on repayments or don’t conform to the rules stated in the mortgage contract, they can take legal action against you.

Pulling out of a sale voluntarily

Even if your mortgage offer is not withdrawn, you may consider pulling out of a property purchase. If this is a consideration, it’s important to understand any potential ramifications from this.

Can I pull out of a house sale/purchase?

You can walk away from a purchase or sale without issues at any time until the exchange of contracts in England and Wales because an offer to buy or sell is not legally binding until this point, after which all parties must obey the terms of the contract they’ve signed. If you pull out after the exchange of contracts, you could face legal and financial punishments.

If you pull out early as a buyer or seller, there are still consequences that are important to consider. Financially speaking, the buyer runs the risk of losing their deposit and both parties will have wasted the non-refundable expenses already laid out for things like conveyancing and surveys. In such cases, the party who instigated the pull-out can be taken to court and made to cover the losses suffered by the other.

In Scotland, the rules are slightly different. You can only pull out of a sale or purchase before the conclusion of missives – a series of letters between solicitors on behalf of their clients which constitute the contract for the sale. After these letters have been sent, nobody can back out of the sale.

What are the implications of pulling out?

If a buyer wants to withdraw from a sale after the exchange of contracts, the seller may be entitled to keep the deposit already paid which means the buyer could be losing tens of thousands of pounds. The seller can then sell the property to somebody else. Furthermore, the seller can claim damages from the buyer, this can include any potential losses incurred such as market depreciation if the value of the property has gone down.

If a seller pulls out after the exchange of contracts, they may still have to pay the fee they agreed to give their estate agent. The same could apply to the conveyancer, depending on the specific terms of your agreement with them. The buyer can also claim back their full deposit.

How can House Buyer Bureau help

In the unfortunate event someone chooses to pull out from purchasing your house, not only can there be financial consequences but the whole house buying chain can fail, with the house you’re purchasing not being willing to wait for you to find a new buyer. Although the main option may seem to put your house back on the market, if the buying chain is unwilling to wait, there is another option.

Here at House Buyer Bureau, we are a genuine cash house-buying company and can help get your house purchasing journey back on track. We have the funds ready to buy your home in as little as 7-days — just ask us for proof! Get in touch with our friendly team of house-buying experts today to discuss your needs and get a free, no-obligation cash offer.

Chris

Chris has worked in property all his career, first as a successful estate agent before spotting a gap in the market for buying property directly from people looking for a simple, quick sale.

He has a passion for property and as an experienced valuer, has looked at well over 50,000 properties so far at HBB. He has extensive experience in property buying and regularly comments in the press on property matters, trends and promotes ways to simplify and speed up the selling process.

View articles by Chris