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sijfish

Exchange before Mortgage Offer?

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Hi there,

I'm purchasing my first BTL. I have a mortgage decision in principle from my broker and put a reservation down. Conveyancing is underway and legals are with solicitor. I'm advised timeline for exchange of contracts (with deposit) is 28 days from receipt of contract from the vendor, which is in a few weeks time. Meanwhile the full application for my mortgage is underway, but taking a bit of time under present circumstances.

Any advice on what I should do if I don't have the mortgage offer by the scheduled date of exchange? Thanks in advance!

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Are you purchasing from an auction? Why is there a 28 day deadline to exchange. Your solicitor will not let you exchange if your planing on getting a mortgage.

Lenders are trying their best to progress applications but they have a backlog due to surveys only recently being allowed. You will risk losing your reservation fee. Maybe speak to the agent and tell them to inform the seller that things mistake a little longer due to the current climate. Any sensible seller will understand.

 

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Thanks @ahmed i. No this is an off plan purchase coming to practical completion soon, so the vendor is a developer. The agent's terms and conditions stipulated a 28 day timeline to exchange from receipt of contract. I'm managing expectations on the agent side so I can only hope they are doing the same with the vendor. 

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Hi,

This is quite a common requirement with off plan purchases, especially where a % of the purchase price is required as a deposit at exchange of contracts. I am also in this position for a few purchases that are coming to practical completion over the next few months.

This is one area that you particularly need to focus on during the reservation stage before putting down any money. Usually, it involves an initial discussion with your broker and identifying lenders that should lend based on your personal circumstances and also taking into account the specifics of the off plan property.

Purchasers will usually start a mortgage application around 4 months (can vary) before practical completion is anticipated. This gives enough time to secure a mortgage offer and deal with issues that may have been encountered, such as having to start a new application with another lender for whatever reason.

What date is exchange of contracts expected? And what date is Completion of the property expected?

 

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Hi @onkar, thanks.

I did have a mortgage decision in principle at time of reservation. However, admittedly I knew practical completion was just around the corner and certainly not 4 months. I'll pin that on noob naivety.

Reservation was beginning May, so by the agent's timeline exchange should be June and I expect practical completion in July.

Now I know I can't exchange before mortgage offer, so it's not a question of risking the deposit but rather hoping the lender comes through in time and/or the vendor is lenient. I can't be the only buyer in this situation with the backlog of applications lenders must have at the moment (as @ahmed i says). Here's hoping!

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Hi @sijfish, I have purchased off-plan BTL, exchanged 5 years ago and only recently completed. One thing I have learnt that mortgage may be tricky if the off-plan BTL is targeted at investors especially apartments. I have 2 decision in principle and both was rejected when it reach valuation stage. It is interesting that you cannot exchange before mortgage offer, my recent experience is the lender would need to be able to send their surveyors out for valuation before approving the mortgage. If the place is not ready, I am wondering how will the valuation take place if contract have to exchange before mortgage offer? 

As @onkar mentioned, you should put in application few months before completion as lenders have quota for each development (20% or so), I am assuming you are buying apartment. If you have mortgage offer and it expiring in 3 months, speak to them and they usually will be able to extend it. Do speak to your broker and sometimes they are able to check with lenders if the property is okay for lending or if they have met their quota. 

Good luck to you!

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