In contract for new-build, but mortgage offer about to expire - can I proceed with a different lender?

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LLB123

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As above my mortgage offer is due to expire in a few weeks but I am in contracts for a new build that will likely be delayed for a few more months (if I'm lucky). My lender has increased rates three times since letter of offer issued and is far down the list of offering the most competitive rates on the market. If the build keeps being delayed my repayments will keep going up making the new purchase far less affordable than when I signed contracts.

Do I need to stick with the same bank in order to complete the contract, or can I shop around for a better rate and just let existing letter of offer lapse?
 
LLB123 said:
As above my mortgage offer is due to expire in a few weeks but I am in contracts for a new build that will likely be delayed for a few more months (if I'm lucky). My lender has increased rates three times since letter of offer issued and is far down the list of offering the most competitive rates on the market. If the build keeps being delayed my repayments will keep going up making the new purchase far less affordable than when I signed contracts.

Do I need to stick with the same bank in order to complete the contract, or can I shop around for a better rate and just let existing letter of offer lapse?
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You can extend it to be safe so you have some sort of offer but that doesn't stop you getting AIP from other banks.

Edit: Post crossed with Redonion. As he says...
 
RedOnion said:
You can shop around until drawdown.
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Sunny said:
You can extend it to be safe so you have some sort of offer but that doesn't stop you getting AIP from other banks.
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But am I allowed to enter into a fresh letter of offer from another bank in the meantime if the original offer can just be extended?
I was under the impression that an LOI was a legal document that needs to go through a solicitor and that I couldn't officially sign for finance with more than one lender at a time.
 
LLB123 said:
But am I allowed to enter into a fresh letter of offer from another bank
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Of course.

LLB123 said:
LOI was a legal document that needs to go through a solicitor and that I couldn't officially sign for finance with more than one lender at a time
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You haven't drawn down the mortgage. You just need to let your solicitor know you're switching lender. You're not signing anything at this stage.
 
LLB123 said:
As above my mortgage offer is due to expire in a few weeks but I am in contracts for a new build that will likely be delayed for a few more months (if I'm lucky). My lender has increased rates three times since letter of offer issued and is far down the list of offering the most competitive rates on the market. If the build keeps being delayed my repayments will keep going up making the new purchase far less affordable than when I signed contracts.

Do I need to stick with the same bank in order to complete the contract, or can I shop around for a better rate and just let existing letter of offer lapse?
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How many months will it be delayed? Are you happy about that. Can you afford current rates. A few figures would be helpful. Clearly you can borrow from whichever bank you want. You don't have a contract with the bank.
 
Bronte said:
How many months will it be delayed? Are you happy about that. Can you afford current rates. A few figures would be helpful. Clearly you can borrow from whichever bank you want. You don't have a contract with the bank.
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Can't get a definitive answer on completion timing and definitely not happy about it all, because it's costing us more money by the month with rent and furniture storage costs, to say nothing of increased repayments for the foreseeable. To the point that it's all looking a bit tight for comfort as is, never mind further into the future.
Because we have a subject to mortgage clause in our contract I thought we could pull out of the sale once the current Letter of Offer expired but it seems it's not that simple. So hoping to try and arrange finance at a lower rate to allow us some breathing space.
 
Bronte said:
Can you type up the mortgage clause on here.
Do you want to pull out?
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Thanks @Bronte This is the exact wording of the clause:

'This contract shall be subject to the purchaser obtaining approval for a loan of € from (lender) on the security of the premises PROVIDED ALWAYS that if this loan has not been approved in writing within four weeks from the date hereof either party shall be entitled to rescind this contract and in such event the purchaser shall be refunded his deposit without interest costs or compensation thereon.
If the loan approval is conditional on a survey satisfactory to the lending institution or a mortgage protection or a life insurance policy being taken out or the lending institution being satisfied at any time prior to drawdown of the loan that its valuation of the property has not changed since the date of loan approval or some other condition compliance with which is not within the control of the purchaser the loan shall not be deemed to be approved until the purchaser is in a position to accept and draw down the loan on terms which are within his reasonable power or procurement.'
 
Bronte said:
Can you type up the mortgage clause on here.
Do you want to pull out?
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I'd pull out in the morning if I could because I'm already being strung along too long and afraid now that the developer may even go under taking our desposit with them since work on the entire site has ground to a halt altogether. Homebond only covers a fraction of the deposit.
 
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LLB123 said:
Thanks @Bronte This is the exact wording of the clause:

'This contract shall be subject to the purchaser obtaining approval for a loan of € from (lender) on the security of the premises PROVIDED ALWAYS that if this loan has not been approved in writing within four weeks from the date hereof either party shall be entitled to rescind this contract and in such event the purchaser shall be refunded his deposit without interest costs or compensation thereon.
If the loan approval is conditional on a survey satisfactory to the lending institution or a mortgage protection or a life insurance policy being taken out or the lending institution being satisfied at any time prior to drawdown of the loan that its valuation of the property has not changed since the date of loan approval or some other condition compliance with which is not within the control of the purchaser the loan shall not be deemed to be approved until the purchaser is in a position to accept and draw down the loan on terms which are within his reasonable power or procurement.'
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You said you want to pull out. Clearly you have to prove to your bank you can't afford the loan. Is the lender named in that clause?

Can you give us a rough idea of how much deposit there is and how much you'd lose. Did your solicitor explain that to you, that's pretty risky unless the amount is low. Homebound sounds wonderful.
 
LLB123 said:
This contract shall be subject to the purchaser obtaining approval for a loan of € from (lender) on the security of the premises PROVIDED ALWAYS that if this loan has not been approved in writing within four weeks from the date hereof either party shall be entitled to rescind this contract and in such event the purchaser shall be refunded his deposit without interest costs or compensation thereon.
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Obviously rely on your solicitors advice but my reading of this is that you had 4 weeks from signing contracts to obtain approval. If you failed to do so then either you or the builder could walk away.

However you did obtain that approval so that clause is no longer relevant. It is not worded in such a way to allow you pull out because that loan approval expired.

In your shoes I would first get your current loan offer extended. This should be relatively easy. After that, apply for AIP with other lenders to give yourself options.

But more importantly, if the details from some of your previous threads are still correct then you don't need the mortgage at all so what is the issue? Do you just want to pull out because of a change of mind?

Standard for mortgage to be conditional on sale of PPR?

It will all be about repayment capacity!
www.askaboutmoney.com
 
_OkGo_ said:
Obviously rely on your solicitors advice but my reading of this is that you had 4 weeks from signing contracts to obtain approval. If you failed to do so then either you or the builder could walk away.

However you did obtain that approval so that clause is no longer relevant. It is not worded in such a way to allow you pull out because that loan approval expired.

In your shoes I would first get your current loan offer extended. This should be relatively easy. After that, apply for AIP with other lenders to give yourself options.

But more importantly, if the details from some of your previous threads are still correct then you don't need the mortgage at all so what is the issue? Do you just want to pull out because of a change of mind?

Standard for mortgage to be conditional on sale of PPR?

It will all be about repayment capacity!
www.askaboutmoney.com
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Not change of mind, more loss of faith. There’s a 1.2m purchase at stake and a development that has obviously run aground. The risk of tying up a 120k deposit for years with potentially nothing but receivership problems at the end of it is an issue by anyone’s standards, surely.
 
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_OkGo_ said:
Obviously rely on your solicitors advice but my reading of this is that you had 4 weeks from signing contracts to obtain approval. If you failed to do so then either you or the builder could walk away.

However you did obtain that approval so that clause is no longer relevant. It is not worded in such a way to allow you pull out because that loan approval expired.

In your shoes I would first get your current loan offer extended. This should be relatively easy. After that, apply for AIP with other lenders to give yourself options.

But more importantly, if the details from some of your previous threads are still correct then you don't need the mortgage at all so what is the issue? Do you just want to pull out because of a change of mind?

Standard for mortgage to be conditional on sale of PPR?

It will all be about repayment capacity!
www.askaboutmoney.com
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Mortgage approval can always be pulled. The offer is no longer available, the rate changes, the borrower cannot afford the new rate. No purchasing solicitor should let their client sign a contract with an open ended clause like that.

When I was selling recently there was the mortgage clause in there. And until transfer date I was under stress that the purchasers contract, while binding, was subject not just to mortgage approval, but to actual drawdown. Approval is only one step, a relatively easy one. But in a market of rising mortgage rates it made me concerned.

Here is the standard Law Society discussion on it: (relevant bit in red which is what OP has in his contract)


This contract shall be subject to the purchaser obtaining approval for a loan of €________ from (lender) ___________________ on the security of the premises PROVIDED ALWAYS that if this loan has not been approved in writing within four weeks from the date hereof either party shall be entitled to rescind this contract and in such event the purchaser shall be refunded his deposit without interest costs or compensation thereon.
If the loan approval is conditional on a survey satisfactory to the lending institution or a mortgage protection or a life insurance policy being taken out or the lending institution being satisfied at any time prior to drawdown of the loan that its valuation of the property has not changed since the date of loan approval or some other condition compliance with which is not within the control of the purchaser, the loan shall not be deemed to be approved until the purchaser is in a position to accept and draw down the loan on terms which are within his reasonable power or procurement.
 
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LLB123 said:
Not change of mind, more loss of faith. There’s a 1.2m purchase at stake and a development that has obviously run aground. The risk of tying up a 120k deposit for years with potentially nothing but receivership problems at the end of it is an issue by anyone’s standards, surely.
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Read the link I put up. And this.


No borrower should ever not have a loan clause to drawdown. But there was a period of madness on this and purchasers signed all sorts. The Law Society should always have protected the purchaser, particularly against big developers.

- Has your mortgage interest rate changed?
- Has the value of the property changed? I'd be amazed it hasn't given the interest rate rises.
 
Bronte said:
Read the link I put up. And this.


No borrower should ever not have a loan clause to drawdown. But there was a period of madness on this and purchasers signed all sorts. The Law Society should always have protected the purchaser, particularly against big developers.

- Has your mortgage interest rate changed?
- Has the value of the property changed? I'd be amazed it hasn't given the interest rate rises.
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Yes, the interest rate has gone up three times since original LOI issued. Can't say re the property because we can't do final valuation.

When I signed six months ago, the house itself was ready to go (still is) with kitchen in and only flooring to go down. According to the agent completion date would be imminent, though the development contract had a (supposedly standard) 36 month timeframe for them to leave the site ( another phase planned so fair enough).
So I sold my PPR, confident I'd be good to go with all funds in place once the completion notice came in. But 'imminent' has turned into six months and now another six on the way, still with no explanation of cause of delay.
The condition of the site itself is still broadly the same as when we first viewed, except now pretty much abandoned with just a few lads wandering around scratching their arses, but worse, no one else has moved in to any of the other fully-built houses in the development either.
So basically red flags all around.

I personally suspect the developer is in trouble, maybe funding has dried up, build costs have risen out of control or somesuch, can only guess really since the agent just fobs me off with standard nonsense about waiting on utility connections etc. But utilities are not responsible for finishing out groundworks or half-built boundary walls.

So yes, the landscape has changed considerably since I signed for this new-build, and if I can find an out via that loan clause, you can bet I'd jump on it.
But my solicitor is straight as a die - pretty certain he won't let us invoke it because of that 36 month completion timeframe. Which has us rightly stuck if (when) developer goes bust.
 
LLB123 said:
But my solicitor is straight as a die - pretty certain he won't let us invoke it because of that 36 month completion timeframe. Which has us rightly stuck if (when) developer goes bust.
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Have you spoken to him?

Can you afford the new mortgage rates?
 
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