Every week we ask an expert to answer your financial problems or consumer disputes in the Money blog. Today, we tackled this issue sent to us by a reader in Shropshire, who writes:
We are due to complete on our first house in a couple of weeks but my wife found out last week that she’s being made redundant. She works in sales and is likely to get another job soon. All our credit checks have been passed. Do we need to disclose this?
The Money team answers…
First, we are sorry to hear about your wife’s redundancy. This kind of thing is unwelcome at any time, but if you’re in the process of a house move – one of life’s most stressful events – it can be particularly gut-wrenching.
Do you have to tell your lender?
Money regular David Hollingworth, associate director at L&C Mortgages, says: “There will be a requirement for the applicant to let the lender know that there’s been a change in their financial circumstances.”
Most lenders will explicitly stipulate that you have to make them aware of a change of circumstances, such as redundancy.
If you don’t, it could have a financial impact, says Natalie Bradley, partner and conveyancing specialist at Stephensons.
“The client could commit themselves to an exchange of contracts. The lender may then carry out another credit check (some do but it is rare) and ask for further payslips,” she says.
“They then may withdraw the mortgage offer as they become aware of the change in circumstances. If this were to happen the client would then lose the 10% deposit given on exchange.”
She also says if the buyer did not consent to their solicitor telling the lender about the redundancy, the solicitor may pull out of acting on their behalf.
“Naturally, the client does not really want to put themselves in a position where they buy a property with no income to pay the mortgage. This could lead to repossession which would adversely affect their credit rating,” Natalie says.
Will mortgage be withdrawn?
It’s possible for the mortgage offer to be withdrawn if there’s a “material change in circumstances”, says Hollingworth.
“For many, moving from two incomes to one is likely to make it difficult to meet the lenders’ criteria and it could unfortunately mean no longer qualifying for the mortgage.”
Some hope
A job loss doesn’t automatically mean losing your mortgage offer, however.
While it’s worth having a rethink of whether to pursue the mortgage amount you’ve been offered given your new situation, you could still be okay if you are buying with someone else and your combined income is enough to cover repayments.
Significant savings or a new job offer on the horizon could also reassure the lender that you won’t fall behind on paying back what you owe. Or if your wife receives a redundancy payment, a smaller mortgage could be required.
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A mortgage reassessment
A mortgage reassessment could take a while – and it may end in you being offered a smaller loan or higher interest rate.
Hollingworth’s advice is to give good consideration to whether to pursue the mortgage offer and therefore your house purchase at all – and don’t get yourself into trouble.
“Although that would potentially mean missing out on the new home in the near term it could save falling into deeper problems by taking on a bigger debt at a time when income has reduced,” he says.
“Failing to present the correct information to the lender through the application process would be fraudulent.”
This feature is not intended as financial advice – the aim is to give an overview of the things you should think about. Submit your dilemma or consumer dispute via:
- WhatsApp us here
- Email moneyblog@sky.uk with the subject line “Money Problem”
