Lost job after exchange of contracts. What can I do?
Buying a house in the UK is complicated and potentially risky. The final part of the process involves two stages – the exchange of contracts and then completion. Many people assume once you’ve exchanged contracts then you’re home and dry. But things can still go wrong in the period before completion, such as an accident or job loss.
What happens at exchange and completion?
The penultimate stage of buying a house is the exchange of contracts. This is when both the buyer and seller enter into a legally binding agreement and 10% of the purchase price is paid as a deposit. At this point you’re legally committed to buying the property and so you will lose the deposit should you pull out of the sale. A period of time then elapses before the final stage – completion – where the property is paid for in full and the buyer becomes the new owner.
One easy way to minimise any risk between the two stages is to keep as little time as possible between exchanging and completing. This is often around a week, but can happen on the same day. In some cases this period may need to be longer, or it might just be bad timing that something like a job loss happens in the small window of opportunity between the two events.
Could my lender withdraw my mortgage offer if I lose my job after exchanging?
Yes potentially, although hopefully it won’t come to that. The most likely outcome is that your lender will want to reassess your mortgage application based on your new financial situation and so, depending on how close you are to completion, this could impact your timelines. Be open and honest with the sellers and there may be room to negotiate on this if they are in a position to wait for you.
The key question for your lender is going to be how your job loss affects affordability, so 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 exchange of contracts is that your lender withdraws your mortgage offer, or the reassessment delay is such that you are forced to pull out of the sale.
In this situation you will lose any money associated with the costs to date such as conveyancing, surveys and mortgage arrangement fees, as well as your 10% deposit. For many people this would mean being left without enough money to start over until they are able to build their savings back up.
Should I just keep quiet then and not tell my lender?
There will be a lot of people offering helpful advice like ‘what they don’t know won’t hurt them’, but you are contractually obliged to tell your lender about any changes in your circumstances that could impact your mortgage offer, and not telling them could mean you are committing mortgage fraud.
If your lender discovers that you have withheld your job loss from them, not only could they withdraw the mortgage offer, but they could issue a CIFAS marker – sometimes known as a bank fraud marker – against you, which could make it very difficult for you to get any form of credit in the future. Although your lender may not get to know about the change unless it’s from you, they are able to check your employment status and financial situation at any point up until completion if they choose to.
Losing your job at any time can be life changing, but in the middle of buying a house it is hugely stressful. A good starting point is to talk to your broker. They will be able to advise you on your best next steps and give you guidance about how to approach your lender.