Lost Job After Exchange of Contracts. What Can I Do?

Buying a house in the UK can be complicated and potentially risky. The final part of the process involves two key stages: the exchange of contracts and completion.

Many people assume that once contracts are exchanged, everything is secure. However, issues such as an accident or job loss can still arise before completion.

What happens at exchange and completion?

The second-to-last stage of buying a house is the exchange of contracts. At this point, the buyer and seller enter into a legally binding agreement, and the buyer typically pays a 10% deposit on the purchase price.

Once contracts are exchanged, the buyer is legally committed to the purchase, meaning they will forfeit the deposit if they withdraw from the sale. A period of time then follows before the final stage, completion, when the property is paid for in full, and the buyer officially becomes the new owner.

One way to minimise the risk between exchange and completion is to keep the time between these two stages as short as possible. This period is typically around a week but can sometimes occur on the same day. Sometimes, the period may need to be longer, or unfortunate timing, such as a job loss, might occur during this window.

Could my lender withdraw my mortgage offer if I lose my job after exchanging?

Yes, potentially, although hopefully, it won’t happen. The most likely outcome is that your lender will want to reassess your mortgage application based on your new financial situation. So, depending on how close you are to completion, this could impact your timelines. Be open and honest with the sellers; there may be room to negotiate on this if they can wait for you.

The key question for your lender is going to be how your job loss affects affordability. If your application is joint with a partner and their earnings are high, it might be less significant. Having a new job lined up could also help, although your lender will want to know about any probationary period, as this may have an impact.

What’s the worst-case scenario?

The worst-case scenario after a job loss following the exchange of contracts is that your lender withdraws your mortgage offer or the reassessment delay forces you to withdraw from the sale.

In this situation, you will lose any money associated with the costs to date, such as conveyancing, surveys, mortgage arrangement fees, and your 10% deposit. For many people, this would mean being left without enough money to start over until they can build their savings back up.

Should I just keep quiet then and not tell my lender?

Some people might advise you to keep quiet, but you are legally obligated to inform your lender of any changes in your circumstances that could affect your mortgage offer. Failing to do so could be considered mortgage fraud.

If your lender finds out that you have concealed your job loss, they could withdraw the mortgage offer and potentially issue a CIFAS marker, a bank fraud marker, against you. This could make it difficult for you to obtain credit in the future. Even though your lender may not find out about the change unless you disclose it, they can check your employment status and financial situation at any time before completion.

Losing your job at any time can be life-changing, but it is especially stressful during the process of buying a house. A good starting point is to speak with your mortgage broker. They can advise you on your next steps and how to approach your lender.