After the exchange of contracts, it’s highly unliked your mortgage will be declined. Nonetheless there is a small risk at this late stage. This can be stressful, but it doesn't have to be the end of your home-buying journey.

In this article, we'll discuss what could lead to a mortgage declined after exchange of contracts. We'll also go over what you can do to prevent a mortgage offer declined after exchange as well as the next steps to take if this happens to you.


What Is the Exchange Process?

Exchange of contracts is one of the final stages of the property-buying process. This is the point where you'll sign a contract confirming that you're buying the house, and the seller will sign a contract confirming that they're selling it to you. Usually, your conveyancers will actually exchange the contracts. This is also when you pay the deposit on the purchase.

After this point, you have entered into a legal agreement to buy the property. Following this, the next stage would be completion, where the balance of the purchase price is transferred to the seller and your mortgage loan becomes active.


Can a Mortgage Be Declined After Exchange of Contracts?

Yes, a mortgage offer can be revoked after the step of contract exchange. However, it's rare to have a mortgage offer withdrawn this late into the process. By this point, you'll have presented your proof of income and other information to the lender and the lender will have checked your credit history, background and other factors. This means that the lender should, by now, know you meet their lending criteria. Still, it's possible for a mortgage to get declined at this point for a variety of reasons.


Why Would a Mortgage Be Declined After Exchange?

If you're wondering what could lead to a mortgage offer being withdrawn after exchange, there can be a range of common reasons, including the following.

Mortgage Offer Expiration

This is one of the most likely reasons why your mortgage could be declined later in the process. Most mortgage offers only have a 6 month period where they're valid. If there are any delays in exchanging contracts, your mortgage offer could expire. Delays can happen due to legal issues, or most commonly if the seller of the property has to deal with a chain and needs to arrange their own next property. The more steps in the chain - that is, the more people who are waiting on others to sell their house - the more likely a delay is.

The good news is that if you're close to exchange, your solicitor can request an extension on the mortgage. This is usually granted within reason, but there's no guarantee.

Legal Issues

Though it's rare, there can sometimes be legal problems that could complicate the house or flat-buying process. If significant worrying information is discovered after exchange, a mortgage lender could revoke your offer. This includes problems with ownership or deed issues, though these details are usually checked before the sale reaches this stage.

Credit History

Most mortgage lenders will have carried out a soft credit check before offering a Decision in Principle and they’ll have done a hard credit check before exchange.

However, some lenders will do another credit check before completion. This is because providers will want to do a final check to see if there are any new issues that could have cropped up since your last check. If this reveals issues such as new loans, late payments, or defaults, your mortgage offer could be revoked. There might also be an issue if you have a history of gambling. Lenders are more likely to do a final credit check if you've had a change of circumstances, such as changing jobs, taking out new finance, or having other financial issues.

A Change in Affordability

If you've had a change of circumstances that could affect your ability to repay your mortgage loan, you’ll need to report this to the lender. If you've lost your job or now have to manage on a lower income, or if you have new debts, you might get rejected as you may no longer reach the lender’s affordability requirements for the loan offer you received.

Paperwork Errors or Omissions

Buying a house can be a complicated legal process and all the paperwork and details need to be correct in order to ensure that all parties - including the buyer, the seller and the mortgage lender - are all protected properly.

It's unfortunately possible for errors to be made when the paperwork is being filled out. Lenders will also revoke their mortgage offer if they suspect that you've omitted any important details from your mortgage application, such as loans you have, other expenses, or any issues such as house repossession in your past. If the error is accidental, you might be able to make a new application with the same lender.

Any Suspicion of Fraud or Foul Play

Mortgage lenders have to try to minimise the risk they take on when they give a borrower a loan. If they suspect that anything in your application is fraudulent, they will likely cancel your mortgage offer to protect themselves – although this will normally happen long before the application would reach the exchange stage.


How Common Is It for a Mortgage to Be Declined After Exchange?

It's relatively rare to have a mortgage offer declined after exchange. By this stage, most details will have been worked out and the lender should have done sufficient checks to make sure that you meet their criteria and are eligible for the mortgage. The seller will also want to make sure that they can continue with the sale, so it's likely they'll have done what they can to ensure there are no problems with their paperwork, or anything else at their end.

While it's unlikely that you'll have your mortgage offer revoked at this point, you should make sure you know what to do in case it does happen, so you know what your options are.


What Should I Do if My Mortgage Gets Declined?

It's important to know what your next steps are if you have a mortgage offer declined after exchange. Our top tips for dealing with a declined mortgage include the following.

  • Find out what is wrong - if you want to make sure your next application is likely to get approved, you should make sure you know what the problem is. If the mortgage lender doesn't tell you what caused the rejection, you should get in touch with them and ask for an explanation. This will help you decide what to do next. If it's a minor error in the paperwork, you might be able to get this resolved without having to start a whole new application. If, however, it's because a major credit issue has come to light, you might need to apply again with a different lender that specialises in adverse credit
  • Get expert advice - having your mortgage declined this late into the process is unlikely but can be extremely stressful. One of the best ways to deal with this is to get expert advice from an experienced mortgage broker like John Charcol. We’ll be able to help explain your options if you have been declined after the exchange and guide you through your next steps so you stand a better chance of securing a mortgage in the future. It’s in your best interest to secure advice before simply reapplying with another lender

How Can a Broker Help if My Mortgage Gets Declined?

Mortgage brokers generally have a great deal of experience with unusual cases, so we can help you if you find out that your mortgage has been declined towards the end of the process. One of our advisers will be able to help you understand what happened and guide you through what to do next.

If the issue is relatively minor, a broker might be able to assist by disputing the offer withdrawal in the hopes of getting your house-buying process back on track with as little disruption as possible.

If the problem is more significant, a mortgage broker will be able to give you advice on how to boost your chances of getting a mortgage with your next application. This can include telling you what went wrong before, what to avoid in the future, what steps you can take to improve affordability, as well as helping you find the right lender.

Finding the right lender for your circumstances is important. A lot of high street lenders often have very rigid lending criteria and they can reject borrowers who do not fit these criteria. However, there are many specialist lenders that will have more flexible criteria. For example, even if you get rejected by HSBC or another high street bank, a broker will probably be able to find a lender that is willing to offer you a mortgage.

Brokers also have access to a much wider range of lenders. This is because there are many lenders and private banks that will not deal with borrowers directly.


Can I Cancel a Mortgage after Exchange?

It’s possible to cancel your mortgage after exchange but it’s inadvisable. You’ll lose your deposit if you pull out of the purchase after exchange.

If you're thinking about cancelling your mortgage, you should always talk to an expert before going ahead. This is because withdrawing from the deal at this late stage could make it more difficult for you to get a new mortgage offer in the future.

Will I Lose Money if My Mortgage Is Cancelled after Exchange?

It's possible that you could lose some non-refundable fees or your deposit if your mortgage is cancelled after exchange. This may depend on who is seen as "at fault", or who cancels the mortgage agreement. A solicitor will be able to help you navigate this situation and can help increase your chances of getting fees refunded.


Mortgage Declined after Exchange: Summary

Having a mortgage declined at the last moment can be incredibly stressful and upsetting. Many buyers think that their mortgage offer is guaranteed at this stage, but in some rare cases, offers can be withdrawn.

If you want to know what to do if your mortgage gets declined after exchange, the best course of action is to contact a broker. An experienced mortgage broker will be able to help you get your mortgage moving forwards again.

Here at John Charcol, we have brokers with a huge range of experience helping people get their mortgages approved after setbacks like this. We can assist in a wide variety of circumstances, and we have access to a vast array of specialist lenders. Get in touch today to see how we can help.


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