How A Change Of Circumstances Can Affect Your Mortgage Application

Life can be unpredictable. If you’re in the mortgage application process and you have a change of circumstances, it’s worth knowing what the rules are, and if it means amending your mortgage offer.

This guide covers everything you need to be aware of if you have a change of circumstances before completion. We’ll explain what you can and can’t do, along with where to find expert support to help assist if you need to notify your lender of a change.

Keep reading for a complete breakdown on the rules around a change of circumstances or click on a link below to jump straight to a section…

What constitutes a change of circumstances during a mortgage application?

This can depend on the lender you’re dealing with. Each will have its own rules around what is a valid change of circumstance that needs to be reported. For the majority of lenders, anything to do with your financial situation, or an income change after a mortgage offer is made, is something they’ll need to be notified of.

Here are some other specific examples of potential valid changes of circumstances that could impact your mortgage offer:

• Adverse changes to your credit reports.
• Changing jobs or becoming self-employed after a mortgage offer or approval.
• Making a change to the property you want to buy after a mortgage offer.
• The official valuation of the property is a lot higher than your original offer.
• You’ve become seriously ill, bankrupt, or are facing redundancy.

Can a mortgage in principle be changed or withdrawn due to a change in circumstances?

This can happen, but it largely depends on how the change of circumstances is reported and managed, along with the nature of the change. It may be necessary for your mortgage in principle to be altered, or potentially withdrawn, depending on the severity of the difference.

But, you have a ‘duty of disclosure’. If you fail to notify your lender of a change that could affect your ability to repay the mortgage, your offer can be withdrawn. This is especially likely if it’s a topic discussed in their terms and rules. If this happens, the lender may also add notes to your application that are visible for potential future lenders to see.

Changing the property you want to buy after a mortgage offer has been made

This can be done, but it will possibly mean amending your mortgage offer. The bank or lender you use will organise for another valuation to take place on the new property. If the new property is cheaper than the first one, some lenders may only let you move your mortgage if you keep the same loan-to-value (LTV) ratio.

Alternatively, if the new property is more expensive, you may need to put down a larger deposit than you originally planned if you were already at the lender’s maximum LTV limit for the first house. The type of property you’re changing too can also make a big difference.

Lender requirements and mortgage rules after a change

Here are a few examples detailing how a change in your current circumstances could impact your position in the eyes of some lenders:

• Bad credit: if it’s the case that something has happened recently to cause adverse credit, lenders will want to take a detailed look into the age, severity, and reason for the bad credit. Don’t worry if this happens to you, a skilled broker will still be able to help you obtain a mortgage, perhaps with a specific bad credit lender if necessary.
• Changing source of income: for those of you who’ve transitioned away from being an employee, you may struggle to show the necessary trading activity and accounts to qualify for the mortgage you’d been offered. If this happens, you may need to take a look into alternatives such as guarantor mortgages or joint mortgages perhaps.
• Reduced income: you may find that your salary or wages are now at a different level. If that happens, you may have to explore other options with your broker to help boost your application. This could involve including any additional money you earn from commission, bonuses, and overtime. Or, you may need to move your application to a specialist low-income lender.

How a broker can help with a change

A change of circumstances doesn’t need to be something to fret over, as long as it’s managed in the right way from the get-go. Having the support of an experienced broker throughout the process means that they can help advise you on the steps to take, even if it leads to amending your mortgage offer or finding a new lender.

Being able to discuss your change to a trusted mortgage broker straight away is so useful because they will know each lender’s terms and rules inside out. This means an expert broker can provide you with qualified and relevant information, instructing you on what changes you need to disclose to meet your obligations.

Each situation will be unique to your particular change of circumstances and the lender you’re dealing with. But, the assistance of a skilled advisor is universally applicable and can help ensure you don’t take any missteps to put your house purchase in jeopardy.

If you’d like to speak with a specialist mortgage broker to assist with your application, just make an enquiry. We’ll introduce you to a knowledgeable advisor for free.

How changes can affect your credit score

A change of circumstance in itself may not affect your credit. But, it depends on what the change is. Changing jobs after a mortgage approval or getting reduced hours won’t directly impact your scores, but missing debt payments might.

However, if your change of circumstances leads to your mortgage offer being withdrawn, this will appear on your credit file. Because technically you’ve been declined a mortgage. This is why any changes should be managed with the help of an expert broker. It will reduce the chance of any unnecessary rejections or unwanted marks on your credit file.

If you want to check your credit score for yourself, head to our credit reports hub to find out how to do it for free.