Covid-19 and What happens if my Mortgage falls through

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The last couple of days we have noticed a lot of hits on our website from people worried about ‘What happens if my Mortgage falls through’ and searching things like:

  • mortgage fees if sale falls through
  • what happens to mortgage offer if sale falls through

Clearly there are a lot of concerns at the minute about what the implications are if your purchase or sale falls through primarily because of Covid19 but obviously it could be for any reason.

In terms of Mortgage fees, (such as a Fixed Rate Booking Fee), it is quite difficult to answer as they will all vary from lender to lender and where you are upto with the case.

However, for our own customers and any mortgage we have arranged we will be able to give you the latest information and advice.

Valuation fees – typically these are refundable if the valuation has not yet been carried out. Once carried out and if the mortgage subsequently falls through, the service has been provided so there won’t be any refund. However, if the valuation was carried out and the mortgage offer includes a ‘refund of valuation fees’, but the lender has withdrawn the offer (due to Cover-19), it would be unfair to the customer so we would like to think that the lender would honour this, should the offer not be reinstated once the Covid-19 dust has settled so to speak. This will be one to watch out for.

Broker fees – our fees are only chargeable on full offer of a Mortgage. We try to take a view on things and if the sale falls through and it is no fault of your own, we would look to transfer your mortgage to a new property, but we take it on a case by case basis.

Some brokers charge on application and some on completion and some may offer a no completion no fee, but very few.

Legal fees – Some conveyancers will offer a no completion no fee guarantee but typically that is only where it is not your fault.

If you were to pull out, it would not be covered, but if someone else in the chain were to back out, then you would be covered. Not all conveyancers offer that guarantee so check the terms and conditions.

I suppose really you need to either call the providers or given the reduced staff available and home working conditions, the best advice for now would be thoroughly read through all your paperwork to see what was agreed, what wasn’t and if there are any ways to get that money refunded.

What happens to your Mortgage offer?

The news on this front is potentially a little bit better. When you apply for a Mortgage there are 2 parts which need to be accepted – you and the property.

If the purchase falls through, it does not mean you have been un-accepted so to speak, so what happens in this case is that with most lenders, you would look for a new suitable property and transfer your mortgage offer over to that property. You will need to have a new valuation carried out however, but lenders are very used to dealing with such circumstances, particularly with a link in the property chain collapsing and having a knock on effect.

Depending on the lender and how long ago your original mortgage offer was issued, you may find you need to provide more bank statements and/or payslips – but this is very much dependent on the finer details.

If it is very late in the day, say within a month of your mortgage offer expiring, you may find (depending on the lender and the way it sources its funds) that an extension is needed or possibly a brand new application.

Summary

This Covid19 is currently putting many peoples lives on hold and the mortgage industry is trying to be as flexible as possible but with so many unknowns they are limited as to what they can do for the time being.

Every application will be different however so if you have a Mortgage broker, speak to them.

I am sure they are more than happy to help and will try to allay your concerns – but again due to the fact this has never really happened before it is all new territory.

I know that personally we are trying to keep our customers up to speed with everything but we do not yet have all of the answers. A lot will depend on when the lock down is lifted, if it is June time and how it is lifted.

Hopefully most mortgages can be rescued in the short term, if it is November then it may be a different outcome as the longer the economy is in stagnation the more cautious that lenders will be and it may mean some stricter application criteria.

We did another post on sales falling through prior to Corona Virus that may have a little more information here, although a lot of it will overlap.