How Long Does A Mortgage Offer Last?
Mortgages in Principle & Mortgage Offers
In this mortgage guide we look at the answers, explore what role a mortgage offer plays and how long it lasts for once it has been issued. We will also look at the stages leading up to getting a mortgage offer.
Taking out a mortgage when buying a home these days and a huge part of the process in buying a home. Getting a mortgage offer is a big part of the milestone, this is when your mortgage lender officially offers you the funds to purchase the property you are proceeding with.
But once you’ve got an offer, it’s normal to have a lot of questions. Like how long does it take to get from the offer stage to completion? What happens next? How long does a mortgage offer last & what happens if the mortgage offer runs out?
Agreement In Principle Stage
Simply put, an Agreement in Principle, sometimes written just as AIP and also referred to as a or decision in principle or mortgage in principle, is a written estimate from the lender outlining how much you can borrow from them.
Our Mortgage Advisor will go through you situation and take some details from you to see what you can afford.
They will then supply you with an AIP which outlines how much you will be able to borrow meaning that you can start looking for your next home.
Some estate agents or sellers will like to know that you have an agreement in principle before you view or put an offer in on a property as it gives them the peace of mind that you are able to afford it and this won’t affect the sale later on down the line as you get closer to exchange of contracts.
It isn’t a mortgage offer though.
Once you’ve found the property you want to buy and have had an offer accepted you will still need to make a full application for the mortgage.
Our Mortgage Advisers at Alexander Southwell will use the information that you already provided to supply the AIP for the full application, as long as the details are still correct.
An AIP doesn’t guarantee that you would be accepted to borrow that amount. If you have had a change in circumstances, for example you now have a smaller deposit or you have changed jobs this could affect your full application.
Something to watch out for is that getting an AIP “could” impact your credit sore. A credit check will have to be run in order to complete the AIP. If a ‘hard check’ is run then it will leave what we call a ‘footprint’ on your credit record.
This means that if you apply for several AIPs within a short period of time this could negatively affect your credit rating. However, some lenders and advisers will use a ‘soft credit check’.
How long does a mortgage agreement in principle last?
Typically, your agreement in principle will be valid for anywhere between 30 to 90 days in total. After that, the agreement in principle will usually expire, but you can always re-apply (even to the same lender).
One thing to bear in mind is even though you have got an mortgage in principle with one lender, this doesn’t have to be the lender you use to get a mortgage. When you apply for a mortgage your mortgage broker should re-assess the market before mortgage application submission.
Mortgage in principle to mortgage offer
Moving ahead in time slightly and assume you’re happy with your agreement in principle and that it provides you with the loan you need in order to buy a home.
You may now be ready to press ahead with your mortgage application in full.
While you’ve already provided your lender with some details about yourself, they’ll need more information in order to take your application forward.
We will ask for further information & documentation so we can submit your mortgage:
- Payslips from your employer (typically for the last 3 months)
- Identity (usually your passport or driving license)
- Current account bank statements (usually from the last three to six months)
- Credit file to see your credit score
These documents will help secure your mortgage offer.
If you’re self-employed, they might also need information from you such as tax return forms, business account statements and proof of income as part of your mortgage application.
Your lender will need this information from you so that they can carry out underwriting checks on you.
Other than the information that you provide your lender with, they will also want to understand more about the property you’re interested in buying.
Typically, they find out what they need to know through a valuation survey of the home, which they will summarise in a report.
If the property also passes their assessment criteria, then you may be well on your way towards you being able to get a mortgage offer.
Once the application has been submitted, this tends to take 2 to 3 weeks for the lender to issue the formal mortgage offer. This can vary from lender to lender.
Mortgage offer issued! What happens now?
Now you have done the decision in principle, found a property you want to buy, submitted the mortgage application & received a mortgage offer, it might feel like the time to celebrate.
But there’s still a way to go in the house-buying process.
Your mortgage offer is definitely a milestone and a big step in the right direction.
There’s also the small matter of there being a time-limit on the offer you’ve received.
So why does your mortgage offer have an expiry date? Essentially, your offer is a screenshot of your current circumstances based on your household income, credit history, interest rates, and the purchase price at the exact moment of your application. These factors can fluctuate, which is why any mortgage offer has an expiration date.
This expiry date varies between mortgage lender. Typically, mortgage offers last between 3 and 6 months from the date they’re issued. The length of time can vary from lender to lender and when this runs out, some lenders offer a mortgage extension.
What if your mortgage offer expires before exchanging contracts?
Sometimes there are unexpected delays, and it’s going to take longer to complete the sale than the time that’s left on your mortgage offer. As mortgage brokers, we will inform you if this is going to happen.
Depending on your provider and the cause of your delay, you might be able to get an extension on your mortgage offer.
This might involve additional fees. An extension often allows you an extra 1 month to complete the purchase of your new property.
If the lender isn’t willing to offer you an extension, or you’ve left it too late to notify them of the delay, you might need to re-apply for your mortgage. This could involve paying for another valuation and additional solicitors fees.
Your mortgage provider will need to run similar checks they did before. If a delay is unavoidable, an extension is much better than a new application, particularly if your financial circumstances have changed.
Check Your Mortgage Offer!
Make sure you take the time to review your formal mortgage offer carefully, as it provides you with many of the important details about the financial commitment you’re about to make. It’s worth saying that you do have a ‘period of reflection’ (typically 14 days) to take the time to think about whether you go ahead with your mortgage. If you do decide to cancel and not get a mortgage, you should inform your lender or broker and you may be liable for a cancellation fee.
This is mainly between you and the seller of your future home (via your solicitors and theirs). Before you actually get to exchanging contracts with the seller, there are a number of things to tick off of the list first.
- Firstly there’s getting a list of the ‘fixtures and fittings’ that are included in the price of the property.
- There’s also the matter of buildings insurance, which is compulsory when buying with a mortgage. It’s worth pointing out that if you’re buying a leasehold property, you should double check if the buildings insurance is already taken care of by the freehold owner.
- Your solicitor/conveyancer should have completed local area searches for you and have a survey of the home on record.
- You will also need to have all your finances in place in order to complete the transaction. Make sure you have your deposit ready to send as soon as possible.
Once contracts are exchanged, there’s no going back! It can take between 7 and 28 days to go from exchanging contracts to completion. However, some lenders do allow this to happen on the same day), and it’s only at the later stage that you can move in.
For new build properties there can be a large period of time when you exchange contracts and the completion date. This can sometimes be up to 6 months, this is a standard process with a new build purchase.
Want to find the right mortgage for you?
It can be normal to consider your options once you start to look at the finer details involved when buying a home.
Use an independent no fee mortgage broker
How long it takes to get your mortgage will depend on if you have a broker or not.
Mortgages don’t need to be slow and in fact, a broker will speed the whole process up as they will communicate with all the different parties.
Once the lender has been chosen, your broker will also know what documents and information will be needed and will be able to submit this with the application. This can shorten the process to mortgage offer by as much as 2 weeks.
So, how do I get a mortgage?
Alexander Southwell would love to help you.
Sounds good, however, you may be wondering how much this service is going to cost? The answer is not one penny. Contact us today for further information.