"Losing spouse's employment and planning to purchase a home - should mortgage lender be informed?"
Dealing with Redundancy While Buying a Home: What You Need to Know
Hey there! Every week, we chat with financial experts to help you navigate your financial dilemmas, and this week, we're answering a question from a reader in Shropshire. Here's the situation:
You're about to close on your first house in a couple of weeks, but your wife just learned that she's being let go from her job. She works in sales and should land another job soon. Your credit checks have all come back clean. Do you need to disclose this to your lender?
Let's break it down for you:
Do you have to tell your lender about the redundancy?
David Hollingworth, an associate director at L&C Mortgages, says it's essential to keep your lender in the loop about any changes in your financial situation. Most lenders require you to inform them of significant events like redundancy, even if your application or offer is already approved.
Failure to disclose redundancy could lead to financial troubles. Natalie Bradley, partner and conveyancing specialist at Stephensons, explains that if the lender discovers the change in circumstances, they might reassess your creditworthiness. If they're not satisfied with the new financial situation, they could withdraw the mortgage offer, forcing you to forfeit your deposit.
Will the mortgage offer be withdrawn?
It's possible for the mortgage offer to be retracted if there's a "material change in circumstances," says Hollingworth. A job loss could make it difficult to meet the lender's criteria for the mortgage, leading to a withdrawal of the offer.
What are your options?
When redundancy occurs, it's essential to reevaluate your mortgage options. A smaller mortgage amount or higher interest rate might be offered following a reassessment. Discuss your new situation with your mortgage broker or lender, as seasoned professionals can help you find lenders open to your application despite the redundancy risk.
Takeaway:
You must disclose your wife's redundancy to your mortgage lender before you close on the house to comply with lender requirements and avoid any potential issues. Open and transparent communication will help you explore your options and reduce the risk of unexpected complications.
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- Given the upcoming redundancy of your wife, it's crucial to inform your mortgage lender about this significant change in your financial situation, as advised by David Hollingworth, an associate director at L&C Mortgages.
- Failing to disclose your wife's redundancy could result in financial troubles for you, explains Natalie Bradley, a partner and conveyancing specialist at Stephensons, as a discovery of the change in circumstances might lead the lender to reassess your creditworthiness, potentially withdrawing the mortgage offer, causing you to forfeit your deposit.
- If the mortgage offer is retracted due to the "material change in circumstances," like a job loss, it could make it difficult to meet the lender's criteria, as mentioned by Hollingworth.
- In cases of redundancy, it's important to reevaluate your mortgage options, such as considering a smaller mortgage amount or higher interest rates following a reassessment, which experts recommend discussing with your mortgage broker or lender.
- To avoid potential issues and ensure compliance with lender requirements, it's essential to disclose your wife's redundancy before closing the house deal, as advised by financial professionals like Hollingworth, ensuring open and transparent communication in personal finance, real-estate, and the housing market matters.
