Mortgage warning: Your application could be denied even if a mortgage in principal is held

A mortgage in principle is simply a written statement from a lender giving an estimate of what the purchaser can borrow. It is meant to give some indication of an overall budget and signals to the sellers that the buyer is serious when making the next steps.


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The statement can be among the last documents needed before the final steps are taken and having one can be a good sign of things to come.

However, despite its name the statement does not guarantee that everything will work out and new figures from Butterfield Mortgages reveal a potentially worrying trend.

The prime property mortgage provider surveyed 1,305 current homebuyers and homeowners to find out how coronavirus had impacted them.

Of those surveyed, 50 percent of them had been denied a mortgage despite having an agreement in principle.

On top of this, the survey revealed that:

  • 31 percent of respondents had lost their deposit due to delays in getting a mortgage
  • 52 percent of homebuyers had been stuck in a property chain due to challenges completing a transaction during lockdown
  • 39 percent of homebuyers had pulled out of purchasing a property due to COVID-19 despite putting in an offer

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Interestingly, the survey also found that 16 percent of homeowners had taken advantage of a mortgage holiday, but an additional 14 percent had wanted to use the scheme but had difficulty applying for one through their mortgage provider.

Alpa Bhakta, the CEO of Butterfield Mortgages, commented on the company’s findings: “The coronavirus pandemic took the property market by surprise.

“The fact that many mortgage lenders withdrew products or stopped accepting applications during the lockdown has clearly had a damaging effect on property transactions.

“Indeed, today’s research shows that some buyers have lost their deposit, while others have missed out on properties having been denied mortgages despite receiving an agreement in principle.”


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Despite the dour findings, Alpa went on to point out some good news: “Positively, there are mortgage lenders who are continuing to issue loans and support homebuyers.

“What’s more, as lockdown measures are eased we are seeing activity return to the UK property market—as a result, demand that has been pent up over recent months might be released, resulting in a flurry of transactions in the second half of 2020.”

As the lockdown slowly eases the UK may start to see more mortgage action in the coming months.

Some people may be keen to remake this a priority but may be unsure of where they currently stand, given how dramatic the last few months have been.

Fortunately, several mortgage affordability calculators can be found online which can help people identify the basics before mobbing forward.

One of these calculators can be found on the Money Advice Service’s website which is free-to-use and provides impartial information.

This calculator will ask for information on the user’s income levels, living costs and debt levels and once this information is given, the tool will provide a precise figure of what may be able to be borrowed.

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