Having a mortgage declined at any time during the process can be disappointing, but mortgage declined before completion can be very hard to accept.
Delayed completion is understandable, but outright failure might have legal and financial implications.
In case your application is rejected after the contract exchange but before completion, you might lose fees you’ve already paid, not to mention legal problems.
Therefore, it’s essential to understand what steps you can take to get the mortgage process revived. In this guide, that’s what we’re going to discuss.
Table of Contents
Reasons For Mortgage Declined Before Completion
1. Bad Credit Uncovered
Lenders might perform another credit evaluation between contract exchange and completion.
If your financials change significantly during this time and the credit score takes a hit, the offer might be withdrawn before completion.
2. Change In Affordability
Mortgage affordability assessment is a measure lenders use to determine whether you can repay the mortgage amount.
A rule of thumb is that your repayment costs should be more than a third of your total income. If there’s any alteration in your finances, the results of this assessment can be impacted.
Such changes include job loss, new loans, increased expenses, etc. Any combination of these factors can change your affordability results, which might lead to your application being declined.
Mortgage Affordability Calculator
3. Suspicion Of Fraud
Another reason for withdrawal of the offer might be suspicion of fraud. Such suspicions might arise due to discrepancies in your application.
That’s why working with an experienced mortgage broker who can help you with the documentation is important.
4. Offer Expiration
Property purchase is a complicated and lengthy process; mortgage agreements usually have three to six months of validity. This makes it possible that your agreement lapses before completion due to hold-ups regarding legal processes.
However, if nothing else has changed, you can apply again for the mortgage in this case. In most cases, it will be granted.
5. Changes In Lender’s Requirements
Finally, a change in the lender’s requirements can lead to your application being declined. For example, any modification in the Bank of England’s base rate will affect mortgage rates across lenders.
Due to this, lenders might change their requirements, and your application might fall short of some of them, leading to its rejection.
A combination of these reasons can lead to rejection, but as usual, there is a way out of this, as we shall see in the next section.
What To Do Next If Mortgage is Declined Before Completion?
Now that you know about the various reasons why your mortgage might have been declined before completion, it’s time to take a look at the steps you can take next.
You mustn’t rush into things at this stage and take careful, measured action.
1. Avoid Reapplying Immediately
A common reaction after your mortgage has been declined might be to reapply with another lender.
However, this is a mistake; if the mortgage has been dropped due to any changes in your financials, there’s a good chance it will be rejected again.
Repeated rejections within a short time can negatively impact your credit score, so it’s best to take a step back.
2. Understand The Reason For Rejection
Instead, your next step should be understanding why your application was rejected. You can ask your lender about the reason, and while they aren’t obligated to answer, they still might.
If they don’t, you can still figure out the reason. Review your financial statements, credit scores, and application documents to see if you can spot any mistakes or discrepancies.
If you’re unsure what happened, this might be a good time to speak with an experienced mortgage broker. They can help you find the problem and how to get around it.
Frequently Asked Questions (FAQs)
1. What financial losses might I incur if my offer is withdrawn before completion?
The further you’re along in the process, the more fees you might have already paid for the mortgage. You might lose this money if the mortgage is declined just before completion. However, expert mortgage brokers might be able to negotiate with the lender for a refund.
2. Can my application be declined right on the day of completion?
Yes, it can since lenders have the right to withdraw the application any time before completion, even on the day of completion. Although this is a rare case, it might happen in exceptional circumstances.
3. Is the credit check between exchange and completion mandatory?
Not always, but if the lender has reason to suspect that your financial condition has changed, then they might initiate a final credit check.
Your home may be repossessed if you do not keep up repayments on your mortgage.
All content is written by qualified mortgage advisors to provide current, reliable and accurate mortgage information. The information on this website is not specific for each individual reader and therefore does not constitute financial advice.
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