After searching for your perfect home, be it a first time purchase or moving up or down the ladder, the moment you hear that your offer has been accepted can be very exciting. However, there may be instances where you decide to change your mind about the property. This can happen for a number of reasons but the question then arises about what will happen to your finances if you already have a mortgage offer on the house. In this article, change property after mortgage offer, we take a look at the mechanism and process involved.
Free Initial Telephone Discussion
For a free initial discussion on how we can help you with the legal aspects of buying or selling your house, get in touch with us today. We will review your situation and keep you regularly updated, discussing progress in a clear and approachable manner. Early expert legal assistance ensures no mistakes are made and also avoids the stress of dealing with these matters on your own. Simply call us on 0345 901 0445 or complete our online enquiry form and a member of the team will get back to you.
What is the process involved?
When you change your property and transfer your mortgage to this new property, the process is called “mortgage porting”. Not all mortgage products will allow this so it is important to check the terms of your mortgage offer. The idea of porting is that your lender will offer you the same terms for the mortgage on another property.
Does the value of the property make a difference?
Ultimately, your mortgage lender will want to ensure that not only are you a safe bet to lend money to but also that the asset (the house) that they are lending against is also a sound investment. Consequently, if you change the property after you have received a mortgage offer, your bank will instruct a new valuation for the property.
If the new property is cheaper than your original house, your lender will likely only let you move your mortgage if you keep the same loan to property value ratio (LTV). This is because a cheaper property provides less security against the risk of your loan. The bank will be looking to maintain its original LTV so in effect will be lending less. However, don’t forget that the house will be cheaper to buy as well.
If you are looking to buy a more expensive property, you need to consider what the loan to value was on your original house. If you were going to put down a large deposit from your own savings and the loan to value from the bank was not at its maximum limit, you will have greater flexibility. If your agreed mortgage was at its maximum loan to value and you look to transfer it to a more expensive property, you will probably need to contribute more in the way of a deposit. The bank will ultimately be looking to maintain its levels of protection against potential loan default by ensuring the ceiling for its loan to value isn’t passed
Do I have to reapply for the mortgage?
It is likely that the loan will need to be reappraised by the lender again which will mean reapplying. Again, the circumstances and details of the new property will play a part and will ultimately affect the amount of work the mortgage underwriter will need to carry out.
For example, if you are looking to transfer your mortgage to the house next door on a row of almost identical terraced properties, assuming your personal circumstances haven’t changed, the process should be relatively quick and painless.
If, however, you are looking to change your choice of property (and its value) dramatically and its location is completely different, your mortgage application will probably need to be considered from afresh.
Each lender is different and it is essential to contact your lender at your earliest opportunity so that you can manage your expectations regarding their requirements if you intend to change properties.
Also, remember that mortgage offers have a time limit.
Instruct a conveyancing solicitor
There are quite a lot of legal checks that need to be carried out when purchasing a property. Additionally, a solicitor will be required when a mortgage is involved and funds are transferred for exchange and completion. Consequently, it is essential that you have instructed a suitably experienced residential conveyancer and Blackstone Solicitors is well equipped to help you in this regard.
The conveyancer will carry out a number of checks on the property and the land it is built upon. These can include an environmental search (this can include things like whether the land is near an area of Radon gas or other hazardous material), Chancel repair liability (some properties are obliged to pay for the upkeep of the local church. This can sometimes be significant), local authority searches, flood risk searches, coal searches, title register and title plan and other local searches.
These can take time to get the results back so it is important that the process is started as soon as possible.
Ensure your finances are in order
Some people are in the fortunate position, possibly from the sale of another property or through savings, of being cash buyers. This will certainly speed up the whole process of buying a house and will also put you in a strong position with the seller. A cash buyer will generally be the preferred option to both sellers and estate agents. Mortgage offers can be retracted, the buyers’ circumstances may change during the conveyancing process which could affect the mortgage, or the mortgage lender might down value the house. In fact, there a number of reasons a mortgage offer could fall through and it must be remembered that mortgage offers have time limits on them. If you are a cash buyer, ensure your funds are ready to go as it can take time to pull them all together.
The more likely scenario is that you will be purchasing using a mortgage. Once your offer has been accepted you will need to fill in a mortgage application form and provide your lender with the required documentation:
- Proof of ID
- Proof of address
- Proof of earnings
- Recent bank statements.
To facilitate the early stages of your move, it will help to have an agreement in principle from the lender, as it’s likely the estate agent will want to know details of how you will finance the purchase before they put your offer forward to the vendor.
Arrange a survey of the property
If you are buying with a mortgage, your lender will arrange a valuation of the property. The lender is looking to ascertain that their money is safe if they lend against the house. Sometimes their valuation will be less than what you are paying for the house. If this happens, there may be room for negotiations on the price and if not, you may have to either borrow the difference or find another lender. New build properties in falling markets can often fall foul of down valuations.
Irrespective of the mortgage valuation, it is important to consider having a survey carried out on the house. This report will be much more detailed than a bank’s valuation and can identify hidden defects that might prove to be costly. Additionally, if something is discovered in the survey, it will provide you with an opportunity to renegotiate the price accordingly. Alternatively, the survey may reveal an issue that could put you off buying the house altogether.
Get removal quotes
It can take time to arrange for a removals company to move your belongings. Prices, levels of service and availability all need to be taken into consideration and although you won’t have a fixed moving date at this point it is definitely worth making contact with a few removals firms.
Exchanging Contracts
Once your mortgage has been approved and your conveyancing solicitor has confirmed that all the searches have been returned and are satisfactory, you will now be able to sign and exchange contracts. This will legally commit you to the purchase of the property. You will then be asked to pay the deposit, which is usually 10% of the property’s value. At this stage of the transaction, you can no longer pull out without losing your deposit and further costs that were incurred. This means that it’s also a good time to get your home insurance ready.
Although you don’t legally own the property at this stage, you cannot back out after exchange. Once the contracts have been exchanged and the deposit has been paid, a completion date can be agreed upon.
Completion
At the point of completion the mortgage lender releases the funds for the cost of the property and ownership of the house is transferred from the vendor to the buyer. At this point, you become the legal owner of the house. If you need to pay Stamp Duty for your house then you have up to 30 days from completion to pay the charge. This will normally be done through your solicitor, who will also need to be paid after everything else has been sorted out.
How we can help
We have a proven track-record of helping clients buy and sell their homes no matter the size. We will guide you through all the necessary legal due diligence in a comprehensive and timely manner. We firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.
How to Contact our Residential Property Solicitors
It is important for you to be well informed about the issues and obstacles you may face during the transaction. However, expert legal support is crucial in terms of saving you money and ensuring you achieve a positive outcome.
To speak to our Residential Property solicitors today, simply call us on 0345 901 0445, or allow a member of the team to get back to you by filling in our online enquiry form. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
Leave a Reply
You must be logged in to post a comment.