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 can change.

You might be offered a new job, move to different accommodation, or experience a bereavement in the family.

When applying for a mortgage, you complete a fact find that provides a detailed snapshot of your circumstances at the time of application.

However, completing on a property purchase is rarely quick, and it is not uncommon for circumstances to change during the process.

This raises an important question: what happens if your situation changes while your mortgage is being processed, and could it affect your mortgage offer?

This guide explains everything you need to know and includes helpful tips on what to do if your circumstances change.

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

If your circumstances change during the mortgage process, there are several possible outcomes. The first step is to contact your mortgage broker and explain the changes.

Your broker will assess the new information and advise you on what needs to happen next to progress the mortgage.

Broadly speaking, there are three possible outcomes if your situation changes:

• The change does not impact the mortgage application and it continues as normal.
• The change affects the mortgage application and the offer may need to be amended.
• The change cannot be underwritten by the lender and the mortgage is declined.

The outcome will depend entirely on your individual circumstances and the lender involved.

What Changes Can Impact My Mortgage Application?

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

Credit Score Changes

Credit score changes can occur between obtaining an Agreement in Principle (AIP) and submitting the full mortgage application.

If your credit score improves during this period, it is unlikely to cause any issues. In fact, if you were initially considering adverse credit lenders, you may want your broker to reassess whether more competitive lenders are now available to you.

However, if your credit score worsens during this time, your mortgage application could be declined.

The best way to prevent negative changes is to maintain all existing financial commitments and avoid applying for or taking out additional credit before your mortgage completes.

Even though lenders typically credit score you at the point of application, they may carry out further checks later in the process. For this reason, it is important to avoid applying for additional credit after submitting your application.

Job Changes and Moving to Self-Employment

Whether a job change affects your mortgage will depend on the type of change.

If you are promoted and receive a higher salary, you are unlikely to encounter any issues with your mortgage application.

However, if you lose your job, experience a reduction in income, or move from employment to self-employment while applying for a mortgage, this can have significant repercussions.

A loss of employment or drop in income means the lender must reassess your affordability based on your new earnings. While it may still be possible to pass affordability checks with reduced income, you should speak to your broker as soon as possible so they can review your options.

If you are moving to self-employment, your mortgage application will likely be declined and you may not be able to reapply for at least a year.

This is because most lenders require at least one year of trading history from self-employed applicants, with many requiring two or more years of accounts.

In any situation where your income changes, you will almost certainly need to provide updated documentation to demonstrate you can still afford the mortgage.

Changing Property

When you apply for a mortgage, you provide the lender with details of the property you intend to purchase.

However, circumstances can change and you may decide to buy a different property instead.

If this happens, you must inform your broker or lender immediately. In some cases, the lender can simply update the application without issue.

If a valuation has already been carried out, you should be aware that changing the property may result in a new valuation fee being charged.

It is also important to remember that not all properties are considered mortgageable. Each lender has specific property criteria.

If the new property does not meet the lender’s requirements, you may need to find a different lender or choose another property.

Of all potential changes, switching properties often offers the most flexibility, as a broker can usually source an alternative lender if necessary.

Bankruptcy

Bankruptcy is likely to cause serious issues for a mortgage application.

In most cases, a lender will not continue with an application if you are declared bankrupt during the process. If this occurs, you should speak to your broker immediately to explore whether any specialist options are available.

If You or Another Applicant Become Seriously Ill

Lenders do not typically ask about your health when you complete a mortgage application.

However, if you or a joint applicant becomes seriously ill during the process, you should inform your broker or lender.

The lender’s decision will usually focus on whether you can still afford the mortgage. Some illnesses may not affect your ability to work or maintain your income. Others may significantly reduce your earning capacity.

If your income is affected, a lender may decline the application or amend the mortgage terms due to reduced affordability.

Illness is a sensitive matter, and decisions are made on a case-by-case basis. Your broker will be best placed to advise you on how your situation may impact your mortgage.

Can I Still Get a Mortgage if My Circumstances Change?

As outlined above, a change in circumstances can create complications for your mortgage application. In some cases, however, it may simply mean providing updated documentation and having the lender amend the existing mortgage offer.

If your current lender is unwilling to proceed or extend borrowing due to the change, don’t lose hope.

A good mortgage broker can reassess your situation and explore alternative lenders. It is not uncommon for another lender to offer a similar deal, particularly in cases where a property does not meet one lender’s criteria but is acceptable to another.

As with all mortgage applications, outcomes vary from one client to another. Your personal circumstances will be assessed individually, and lenders will often request additional information to better understand your position in relation to the product they are offering.

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

In most cases, yes, you will need to provide new documentation, although there are some exceptions.

If your circumstances have changed and the documents originally used for the mortgage application no longer reflect your current situation, the lender will require updated evidence.

For example, if your income has changed, the lender will ask for up-to-date proof of income. This may include recent payslips or, in some cases, your employment contract.

It is essential that you provide all requested documentation promptly. Failing to do so could result in your mortgage application being declined.

Sometimes, the change in circumstances may be so recent that you do not yet have formal documentation. If this happens, speak to your broker. They can explain the situation to the lender’s underwriter and may be able to provide alternative evidence.

While lenders may request additional financial documentation, it is unlikely they will request medical records.

Illness is not always a straightforward factor in mortgage underwriting, and lenders may approach it differently. Your broker should be your first point of contact for advice tailored to your specific circumstances.

Rules for Mortgages with Change of Circumstances

When applying for a mortgage, you will sign documentation confirming that you will inform the lender of any changes in your circumstances.

If something changes, your first step should be to contact your broker. They will relay the information to the lender and assess whether it is best to proceed with the current application.

In some cases, your broker may recommend switching to a different lender who is more suited to your new situation, rather than risking a formal decline.

Much will depend on how far your application has progressed. If the application is at an advanced stage, a decline may be unavoidable. However, your broker will explain your options clearly and aim to minimise the risk of refusal wherever possible.

Will a Mortgage Offer Refusal Affect My Credit Score?

Whether a refusal affects your credit score depends on the stage at which it occurs.

If you are declined at the Agreement in Principle (also known as a Decision in Principle) stage, it is unlikely to impact your credit score. Most lenders carry out a soft credit search at this stage, which does not leave a visible mark on your credit file.

However, a full mortgage application usually involves a hard credit search, which is recorded on your credit file. If you are declined after a hard search, this can affect your credit score.

In some cases, the lender may also update your credit file to show that the mortgage application is no longer proceeding, which can have an additional impact.

If you are concerned about your credit score or unsure what appears on your credit record, speak to your broker for clarification and guidance.

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

In some situations, you may not be able to obtain a new mortgage offer immediately. This is particularly true if you have moved from employment to self-employment, as most lenders require at least one year of trading history.

In many cases, however, your broker can review the market and identify a lender willing to consider your updated circumstances.

The new mortgage offer may differ from your previous one. You could face a higher interest rate, a larger deposit requirement, or amended terms. It is important to discuss all aspects of the new offer with your broker to ensure it remains affordable and suitable for the full mortgage term.

Boon Brokers is a whole-of-market mortgage, equity release, and insurance broker. This means we can arrange mortgages with lenders that some brokers do not have access to.

This broader access can be particularly valuable when circumstances change, as it increases the likelihood of finding a suitable solution.

Remortgaging with a Change of Circumstances

Remortgaging can be more complicated if your circumstances have changed. Your affordability may be different, or the equity in your property may no longer meet lender requirements.

Remortgaging in these situations can be complex, which is why using a whole-of-market broker can be especially beneficial. They can assess your updated situation and source a deal that is appropriate for your needs.

Boon Brokers offers FREE, no-obligation advice. Whatever your current circumstances, get in touch today and let us help you move closer to your mortgage goals.