Applying for a mortgage can be an intimidating process, but understanding the concept of a mortgage offer is key to making sure you have the best deal. A mortgage offer is essentially a written agreement between yourself and the lender that outlines all of the conditions of your loan.
This includes the amount borrowed, interest rate and other details of your loan. It’s important to understand that these offers are usually only valid for a limited time.
In this article we will discuss what exactly a mortgage offer is, how long it lasts and some factors that may affect its expiration date. We’ll also cover what happens if your offer expires and how to prepare for any delays in getting your loan approved.
What is a mortgage offer?
To get a mortgage offer, you will need to complete a mortgage application and meet the lender’s affordability criteria, which usually involves income and credit checks.
Once the lender has assessed your application, valued your property and determined that you meet their requirements, they will provide you with an official confirmation that they will lend you the mortgage needed to buy your home. This document is known as a mortgage offer.
The offer will outline the specific terms and conditions of the mortgage, including the interest rate, loan amount, repayment term, and any other fees or charges associated with the mortgage. It will also typically include information about your rights and obligations, such as the consequences of missing payments or defaulting on the loan.
Once you receive the mortgage offer, you will have a certain amount of time to review it and accept the terms. If you are happy with the terms, you will need to sign and return the offer to the lender.
How long does it take to get a mortgage offer?
The length of time it takes to get a mortgage offer can vary depending on several factors, such as the lender’s processing times, the complexity of the application, and the availability of documentation.
It shouldn’t take longer than two weeks to receive a mortgage offer, with the average being around two to four weeks. The process can be quicker if you have a straightforward application and all of the necessary documentation is readily available.
However, if there are issues with the application, such as a low credit score or problems with the property valuation, it can take longer to process. Additionally, if the lender requires additional documentation or information, this can also cause a delay.
The underwriters may also experience delays in receiving information that they have requested, such as: employers reference, landlords reference, valuation report.
As the offer of advance is the culmination of all parts of your mortgage application, it can only be issued once everything has been confirmed and received.
Can you get a mortgage offer before choosing a property?
A formal mortgage offer cannot be obtained before choosing a property since the lender’s assessment for mortgage approval includes both an evaluation of the property and your individual financial circumstances.
However, you will be able to get a mortgage in principle. This is a pre-approval from a lender that gives you an idea of how much you may be able to borrow. It is based on a basic assessment of your financial circumstances, such as your income, expenses, credit history, and employment status.
The lender will ask you for some basic information and will perform a credit check to determine your creditworthiness. If you meet the lender’s criteria, they will issue a mortgage in principle, which is typically valid for 30 to 90 days.
Having a mortgage in principle can be useful when you are looking for a property because it gives you an idea of how much you can afford to borrow. This can help you narrow down your property search and make offers with confidence.
Once you have found a property and had your offer to buy accepted, it’s time to apply for the mortgage.
It’s important to note that a mortgage in principle is not a guarantee of a mortgage offer.
How long does a mortgage offer last?
The duration of a mortgage offer will vary depending on the lender and the type of mortgage product. Typically, a mortgage offer is valid for a period of between three to six months, but it can also be shorter or longer, depending on the lender’s policies.
It’s important to note that a mortgage offer has a specific expiration date, and if you do not complete the purchase of the property within this time-frame, you may need to reapply for a new mortgage. This can involve additional fees and credit checks, which can slow down the process and potentially affect your ability to purchase the property.
To avoid any issues with the expiration of your mortgage offer, it’s important to stay in regular communication with your mortgage broker, lender and your solicitor.
Why does it have a time limit?
A mortgage offer has a time limit because the lender needs to ensure that your financial situation and the property value have not significantly changed since the offer was made.
Additionally, interest rates and market conditions can change over time, so a mortgage offer with a longer expiration period can potentially expose the lender to financial risks if interest rates rise or if your circumstances change.
What happens next?
Once your mortgage offer has been issued, you are given a week-long reflection period to review and consider the terms and conditions of the agreement. Your conveyancer is not permitted to proceed until you have given your approval.
It’s important to check every part of the offer to make sure it matches what you applied for.
Errors do occur and sometimes things change that you maybe unaware of at the time.
Your mortgage adviser will be checking the offer for accuracy as well but let them know if you spot any problems.
At this point your new mortgage is approved and ‘waiting’ for you to take the next step.
New build mortgages
The criteria for mortgage offers on new build properties can be more complicated than for existing homes, and the standard mortgage offer period for new builds bought off plan is typically six months.
The new-build lenders recognise that for off-plan purchases the time-frame can change or be delayed. So they are more likely to grant an extension if it is needed.
However, bear in mind that they need to protect themselves from external financial influences and so may extend the offer once but decline anything after that if there’s no sign that completion will be happening.
It’s important to work with a mortgage broker who has experience with new build mortgages, as they can help navigate the complexities of the application process and ensure that you get the best possible outcome.
CONTACT A MORTGAGE BROKER
If you are ready to take the next step then we can put you in touch with a fully qualified independent mortgage broker.
Can a mortgage offer be extended?
You can request an extension for your mortgage offer if you are not able to complete the property purchase before the expiry date.
The lender will evaluate the situation and decide whether to grant the extension or not, there’s no guarantee that they will grant the extension. However, if they agree there may be additional checks and fees involved. It’s important to be aware of the offer’s expiration date and to communicate with your lender to avoid any delays.
Lenders may be willing to extend a mortgage offer for an additional month, and in some cases, even longer, especially if the delays are not your fault. However, the length of the extension will depend on the lender’s policies and discretion.
If you think you may need an extension, contact your broker as soon as possible to discuss your options.
Can all mortgage offers be extended?
No. An offer extension is at the discretion of the lender, and not every one will provide this option.
Can a mortgage offer be withdrawn?
Yes, this is possible.
As a borrower, you should be aware that a mortgage offer can be withdrawn by the lender under certain circumstances. For example, if the lender discovers that you have provided false or misleading information during the mortgage application process.
Or, during the final credit checks, they can see you have applied for more credit.
In addition, if there is a significant change in your financial situation or the property value since the offer was made, the lender may also withdraw the offer. For example, if you lose your job or the property value drops by a significant amount.
It can also be affected by external factors such as the economy and banking systems.
Where financial markets, including interest rates, are volatile then it can be difficult for a lender to know how much your mortgage will cost them. There are also wider implications where the UK experiences nationwide redundancies, companies going bust and technical recessions.
During 2020 and 2021 the pandemic along with the Stamp Duty reduction caused mortgage lenders to withdraw products and cancel issued mortgage offers without providing any notice because of financial complications.
What to do if your mortgage offer has expired
If your request to extend the offer has been declined then it’s likely that your mortgage offer will expire before you are able to complete on the purchase.
At that point you no longer have a mortgage approved.
It’s best to discuss your options with your broker at the earliest opportunity but there are broadly two options:
Re-apply with the same lender
They will be able to use certain documents and information that they hold which should speed things up.
Find a new lender
This means starting all over again. You would need to find another deal and make a full mortgage application and everything that this entails.
An alternative
Where the mortgage delay causes an issue with the property chain, you may find that some people start to get nervous and want to make alternative arrangements (without you).
If your heart is set on securing the purchase of your new property then a bridging loan may be a helpful stop-gap in this situation. They are short term secured loans which can be arranged really quickly and are designed for these types of problems.
It’s not for everyone but ask your broker for details and costs.
FREQUENTLY ASKED QUESTIONS
What happens if my mortgage application is rejected?
If your mortgage application is rejected, it’s important to understand the reasons why. You can request an explanation from the lender and take steps to address any issues. You can also consider seeking advice from your mortgage broker who can help you understand your options and find alternative lenders.
Does a Mortgage In Principle guarantee I will be offered a mortgage?
A Mortgage In Principle (MIP) is not a guarantee that you will be offered a mortgage, but it does provide an indication of how much you could potentially borrow. The lender will still need to assess your application and confirm that you meet their lending criteria before making a final offer. It’s important to remember that a MIP is not a formal mortgage offer, but rather an initial assessment based on basic information.
What’s the difference between a mortgage offer and an agreement in principle?
A Mortgage Offer is a formal agreement from a lender to provide you with the funds you need to purchase a property, subject to certain conditions. An Agreement in Principle (AIP), also known as a Mortgage In Principle (MIP), is an initial assessment of how much you may be able to borrow. While a Mortgage Offer is a legally binding agreement, an AIP is not, and it is not a guarantee that you will be offered a mortgage.
We also answer the related question: Is a mortgage illustration the same as a mortgage offer?
