Your mortgage offer is definitely a milestone and a big step in the right direction, but it is not a job done quite yet. 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 snapshot of your current circumstances based on your household income, credit history, interest rates, and the housing market at the exact moment of your application. These factors can (and do) fluctuate, which is why any mortgage offer has an expiration date.
Naturally, you’ll have questions. How long does a mortgage offer last? Does it vary between lenders? How long does the mortgage process take, and what is the average time to completion after you’ve received your offer?
So, you want to buy a house. Like most buyers, you’ll probably need a mortgage to do this. First, you’ll want to organise your finances. This means finding out your credit score and establishing the total cost of buying a home, from stamp duty to survey fees. Then, you’ll need to work out what you can afford to repay each month.
Next, it’s time to research potential lenders and compare mortgages. It’s always good to shop around and consider a range of lenders to find the mortgage and provider that best suits your particular circumstances. When you’re happy, it’s time to apply. Filling in your mortgage application is generally a quick process, but gathering all the information you need can take longer.
From this stage, how long it can take to get a mortgage offer will largely depend on how your chosen lender operates and your personal circumstances. The review process usually takes between 2 and 6 weeks, based on the quality of information you’ve given.
The initial application will mean providing information like your household income, the amount you want to borrow, and how much deposit you can afford. These figures help mortgage providers make their initial assessment.
Your prospective mortgage provider also needs permission to carry out a credit check on your financial status and history. This is often done through a credit referencing agency. If you’re shopping around different providers, be careful about letting too many companies run credit checks at once. Even if they are successful, this can affect your credit score.
If it’s a joint mortgage application, you both need to submit your details and go through the checks. A history of debt can be a potential stumbling block. However, lenders primarily assess your income vs outgoings to make a decision on affordability.
If your credit history is acceptable to the lender, your application will move onto the next stage.
Once the mortgage lender is satisfied with the information provided and you’ve passed the credit check, you’ll receive an Agreement In Principle (AIP). This can also be called a mortgage in principle or a decision in principle.
An AIP is a written statement from a mortgage lender saying how much they might lend you to buy a property. It is not the same as a formal mortgage offer, but having one will make estate agents and sellers see you as a serious buyer. For example, you usually need an AIP before you can make an offer on a property.
It’s also worth noting that you do not have to apply for a mortgage from the same lender you get your AIP from – it can simply be a gateway to the next stage.
An agreement in principle is usually valid for 30 to 90 days after it’s issued. However, your AIP is not a guarantee that you’ll be offered a mortgage. Unlike a formal offer, which comes later, the amount, interest rate, term, and features of the mortgage are all subject to change at this stage.
Your AIP is more like an indicator of what you might borrow and will only be finalised once you’ve applied for a mortgage with your chosen lender. To do this, you’ll need to have had an offer on a property accepted.
It can take anywhere from 2 to 6 weeks to receive a mortgage offer once you’ve accepted an agreement in principle and you’re ready to move forward with a complete application.
During this time, the lender will carry out underwriting checks. These are an in-depth assessment of your financial situation and credit history. This will require more information from you, possibly including:
Payslips from your employer (usually for the last three months)
Proof of Identity (passport or driver’s licence)
Bank statements (usually for the last three months)
A P60 form from your employer
Copies of utility bills (usually for the last three months)
This is just some of the information a lender might require. You might be asked to provide other documents, depending on your situation.
If you’re self-employed, the lender may request your SA302 tax return forms and business account statements. These should usually cover the last two years and be certified by an accountant. Suppose you receive benefits, like disability allowance or Universal Credit. In that case, you might be required to show that this is a long-term source of income.
One way to reduce the amount of time this takes is to start gathering all the documents you need as soon as you know you want to buy a property. It’s also sensible to make copies of everything you send and send essential documents with tracked delivery.
Your mortgage offer confirms the amount of money a particular lender is willing to loan you, the interest rate, and the term over which you need to repay it. Although there’s still work to do before completion, this is a significant milestone in your journey to owning a home and a definite cause for celebration! Your mortgage offer will contain information like:
Your name, address, and age
Information about the property you’re buying
Key features of the mortgage including the Interest rate, term, and monthly repayment amounts
Important information about the financial commitment you are about to make
Details of what can happen if you fail to make your repayments
Once you’ve received the offer, you have an official ‘period of reflection’, usually around 7 days, to consider the terms and decide whether to accept. You can still cancel at this stage, but you might incur a fee.
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.
The clock keeps ticking after you’ve accepted the offer, with a deadline for when you’ll need to complete your purchase. In most cases, this should be more than enough time to exchange contracts with the seller and finish the transaction.
Suppose you come up against unexpected delays, and it’s going to take longer to complete the sale than the time that’s left on your mortgage offer. In that case, it’s essential to contact your mortgage lender as soon as possible.
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 the same 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 for the worse.
While it takes an average of 6 months to buy a house, there’s no standard length of time when it comes to purchasing a property. Every purchase is slightly different and can be affected by many uncontrollable factors.
For instance, your purchase could be part of a chain. In that case, you’ll always risk potential delays caused by things outside your control. This is just one factor that can affect the time between applying for a mortgage and completion.
Typically, once you’ve accepted a mortgage offer, you can move onto the next stage: exchanging contracts. This is one of the last steps before setting a completion date and, in a matter of weeks, receiving the keys to your new home!
Before exchanging contracts, there are a few things left to do. This includes agreeing on fixtures and fittings, ensuring your solicitor has completed their paperwork, and ensuring a building survey has been done. You’ll also need building insurance, which is essential when taking out a mortgage. Most importantly, you’ll need to have your finances ready to complete the transaction, including your mortgage offer and full deposit.
Once contracts are exchanged (this is usually arranged between yours and the seller’s solicitors), 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.
As you can see, receiving your mortgage offer is a significant step in the journey towards buying a house. But it’s also not the end of the road. As soon as you get your mortgage offer, the clock starts to tick towards its expiry. It helps to be as organised as possible and maintain good communication with your lender to ensure you don’t miss any milestones or deadlines.
While the length of time a mortgage offer can vary between 3 and 6 months, this is usually more than enough time to complete your purchase and move into your new home.