How Can a Change of Circumstances Affect a Mortgage Offer

Our lives move at a fast pace and there are many reasons why our circumstances change.

We might be offered a different job, find new accommodation or have a bereavement in the family.

When getting a mortgage, you will complete a fact find that takes a detailed snapshot of your life before the application.

But completing on a property sale isn’t a fast process and it isn’t uncommon for changes in circumstances to occur during this time.

Which begs the question, what happens if your situation changes during the process, and will it affect your mortgage?

This guide explains everything and is packed full of helpful tips if your circumstances change.

What Happens to My Mortgage When There is a Change of Circumstances?

There are a few things that can happen to a mortgage if your circumstances change. In the first instance you will need to contact your mortgage broker and discuss the changes.

A broker will be able to assess the new information and tell you what you’ll need to do to get the mortgage from that point on.

Realistically there are three outcomes for a mortgage application if your situation changes;

  • The change doesn’t impact the mortgage application and it continues as normal.
  • The change impacts the mortgage application, and the offer might be amended.
  • The change can’t be underwritten by the mortgage provider, and they decline to offer a mortgage.

The outcome will depend entirely on your personal circumstances and the lender you’re using.

What Changes Can Impact My Mortgage Application?

Let’s explore some of the most common changes in circumstance and how they can affect a mortgage application.

Credit Score Changes

This change can pop up between obtaining an Agreement in Principle (AIP) and the full mortgage application.

If your credit score improves in the timeframe, then you are not going to have an issue with the mortgage application – although if you have been looking at adverse credit lenders you may want to ask your broker to look at lenders who match your improved credit score.

If your credit score takes a turn for the worse during this time, then you could find your mortgage application declined.

The key to preventing a negative change is to maintain your financial commitments and not seek or take out additional credit before the mortgage application completes.

Even though a lender credit scores you at the point of application, they may still process manual credit checks after the application stage so try to avoid applying for additional credit post-application stage.

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Job Changes and Moving to Self-Employment

Again, it depends on the type of change as to whether it will ultimately cause a problem with your mortgage.

If you’re promoted and receive a higher pay cheque for example, then you’re likely not to encounter any problems with your mortgage.

But if you lose your job, lose income or move from employment to self-employment during the time you’re applying for a mortgage then this can have big repercussions for your mortgage.

Losing your job or a drop in income will mean the lender has to re-evaluate your affordability with your current earnings.

It isn’t impossible to still pass affordability with a drop in income – don’t despair, discuss it with your broker and they will complete the work around this for you.

If you’re moving to self-employment, then unfortunately your mortgage will likely be declined, and you won’t be able to reapply for at least a year.

The reason is that self-employed people need at least a year of trading to show a lender (with many lenders asking for 2 or more years trading).

Overall, if you have a change in income, you will almost definitely need to provide new documentation to a lender to show you can still afford the mortgage.

Changing Property

You will have provided your lender with the property details at the point of making your mortgage application.

But we don’t live in the perfect world and there are so many reasons why you might opt to buy another property instead.

First and foremost, you will need to make your broker/lender aware of the new property.

Sometimes this won’t be a problem at all, and the lender will simply update the application. 

If a valuation has been completed already and you make a change of property you should be aware that a new valuation fee may be charged on the new property. 

You should also be wary of the fact that not all properties are deemed mortgageable by lenders and each lender has a specific set of requirements for properties.

If the new property doesn’t meet the lenders’ criteria, then you will have to either find a new lender or another property that does meet the criteria.

As far as changes go – changing the property probably has the most flexibility to get a good outcome as brokers should be able to find a suitable lender, even if your current lender declines.

Bankruptcy

As far as a mortgage application goes, bankruptcy is almost certainly going to cause the most issues.

A lender will be highly unlikely to continue with the application in the event of bankruptcy and you should discuss your situation with your broker to see if there are any solutions.

If You or Another Applicant Become Seriously Ill

This is a bit of an unusual one as lenders don’t ask about your health when you complete a mortgage application.

With that said, if you or another applicant does become seriously ill you should discuss the illness with your broker/lender.

The decision will likely be formulated around whether or not applicants still have the financial means to afford the mortgage.

For example, some serious illnesses aren’t life threatening and don’t limit your ability to work and maintain the level of income needed for the mortgage.

On the flipside, some conditions will have a significant impact on your ability to work and your income may be affected.

In these cases, a lender may well decline or amend the mortgage terms because your ability to afford the mortgage has been reduced.

It goes without saying that illness is a sensitive subject for applicants and lenders’ decisions will be made on a case-by-case basis. Once again, a broker will be best placed to advise you about your illness in relation to a mortgage.

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Can I Still Get a Mortgage if My Circumstances Change?

As highlighted, when changes in circumstances occur it can cause problems with your mortgage. Sometimes though, it is just a matter of providing new documentation and the lender amending the existing mortgage offer.

If you find your lender won’t extend borrowing as a result of your situation changing, then don’t give up hope.

A good broker will be able to reassess the details and look for an alternative.

It might even be the case that the mortgage offer for a new lender isn’t too different from your original mortgage offer and this happens quite frequently when a property doesn’t meet one lenders’ criteria but is fine with another lender.

As is the case with mortgages, decisions and options are likely to be different from one client to another and your personal situation will be looked at in isolation.

Lenders will often ask for more information and try to understand your circumstances better in relation to the mortgage product they’re offering.

Will I Need to Provide New Documentation After a Change of Circumstances?

In all likelihood yes, you will need to provide new documentation with certain exceptions.

If your circumstances have changed and the documentation used to apply for the mortgage is different to your current situation a lender will ask for evidence of this.

For example, if your income has changed a lender will require updated information about your income.

This can be done by providing payslips or sometimes even providing your contract of employment.

It is vital you make every effort to provide ALL documents that a lender requests and if you fail to do so you risk your mortgage being declined. 

A common problem you might face is that the change is so recent that you haven’t got any documentation to demonstrate your situation to the lender – if this is the case you should speak to your broker.

The mortgage broker will be able to relay this back to the underwriter working your case and it might be possible that they can find a solution to the lack of evidence (normally by providing an alternate form of evidence).

We mentioned exceptions to the documentation requirements, and it is fair to say that lenders in all likelihood won’t request medical records. 

Illness isn’t a clear-cut aspect of mortgages and lenders will have different approaches to it. As a result, your broker should be your first port of call as they will advise specific to your situation.

Rules for Mortgages with Change of Circumstances

When applying for a mortgage you will sign documentation that obliges you to inform your lender of any change in circumstances.

In the first instance you should contact your broker who will relay the information to your lender as well as gauge whether or not to proceed with that particular application.

It may be the case that the broker wants to move you to another lender who is more amenable to your situation rather than you go through the stress and impact of having a mortgage declined. 

Of course, this all depends on how far into the process you are, and a mortgage application may have progressed to the point where a decline is unavoidable.

Your broker will be able to explain this to you and will always seek to help you avoid being declined by a lender wherever possible.

Will a Mortgage Offer Refusal Affect My Credit Score?

It depends at which point the refusal comes.

If you’re refused an Agreement in Principle (also known as a Decision in Principle) then the likelihood is it won’t affect your credit score.

This is because most lenders only conduct a soft credit check for these, and it doesn’t get recorded on your credit file.

A full mortgage application will likely be a hard search that does show on your credit file and a refusal at this point can affect your credit score.

House

Beyond the actual application, a lender might need to update your credit file to reflect they’re no longer processing the mortgage application and again this can impact your credit score.

If you’re concerned about your credit score or you have questions about what does and doesn’t appear on your credit record you should contact your broker.

How Do I Get a New Mortgage Offer After My Circumstances Change?

In some cases, you won’t be able to get a new offer for a period of time, especially if you have changed from employment to self-employment.

In most cases though your broker will be able to look at the market and find a lender that will be willing to lend to you.

The product and terms of the new mortgage offer may be different to the previous offer you had, and you might have a higher interest rate or deposit requirement.

You should discuss everything in full with your broker and ensure you’re making a good choice that you can afford for the term of the mortgage.

Boon Brokers is a whole of market mortgage, equity release and insurance broker which means that we can arrange mortgages with lenders that some brokers don’t have access to.

This is particularly useful when circumstances change as we will have a better chance of finding a mortgage solution when compared to brokers that don’t have access to the whole of the market.

Remortgaging with a Change of Circumstances

Remortgaging can be especially tricky if your circumstances have changed. Your affordability might have changed or the equity you hold in the property might not be enough to remortgage.

Remortgaging is a complex area in cases where your personal situation has changed and once again you will be best placed using a whole of market broker to find you a mortgage deal that is appropriate.

Boon Brokers offers FREE, no obligation advice. No matter what your current situation is, give us a call today and we can help you on your way to reaching your mortgage goals.

Gerard BoonB.A. (Hons), CeMAP, CeRER

Gerard is a co-founder and partner of Boon Brokers. Having studied many areas of financial services at the University of Leeds, and following completion of his CeMAP and CeRER qualifications, Gerard has acquired a vast knowledge of the mortgage, insurance and equity release industry.