Understanding both the legal process and mortgage application process when buying a new home will assist your efforts in ensuring completion takes place before the Stamp Duty Holiday comes to an end…
Understanding the House Buying Process
Our blog last month about the Stamp Duty holiday ending on 31 March 2021 identified that mortgage lenders are taking much longer than normal to generate a mortgage offer. This was due to the increased volume of business created by the Stamp Duty holiday announced in July 2020. We are also finding that the conveyancing process is slower too.
It’s important to understand both the legal and mortgage application processes so that you can maximise your efforts to ensure completion within your desired time frame – especially important if you hope to take advantage of the savings afforded by the Stamp Duty holiday.
In this month’s blog we outline the steps required from when your offer on a house has been accepted, through to completion.
The Legal Process
As indicated by the lengthy list below, the legal process takes considerably longer than the mortgage process:
- Your offer is accepted
- You appoint a solicitor to carry out conveyancing – this is the process that transfers a property from one person to another and incorporates all the following steps in the legal process
- Local Authority and other searches are instigated
- Legal paperwork is drawn up
- Land Registry checks are completed
- The contract is drafted and a copy sent to the seller to agree it
- Exchange and Completion dates are negotiated by the solicitors for both parties
- Contracts are Exchanged – this is now legally binding
- Solicitors will check that the vendor still owns the property, has not become bankrupt or had the property repossessed
- Your solicitor works on behalf of you and your lender to ensure everything is in place for Completion
- The Certificate of Title is sent to your lender and requests the new mortgage monies are released
- On completion, your solicitor transfers the monies to the seller’s solicitors and the Deeds to the property are transferred to yourself as the new owner
- Stamp Duty Land Tax must be paid within 14 days of completion of contracts.
This whole process can take 2 to 3 months and often longer. Be prepared to chase your solicitor if you have a specific deadline to meet, especially when they are very busy.
It’s worth noting that solicitors may take extended holidays, get sick or even move on, so it is vital to keep in touch with your legal team – it will be worth it!
The Mortgage Application
- A decision is gained ‘in principle’ with your Mortgage Adviser and you submit an offer for the property you wish to buy
- The offer is accepted
- Your mortgage application is submitted to the lender
- The lender checks your documentation, expenditure, employment history and source of deposit funds
- The lender instructs a valuation survey on the property you intend to buy
- The lender confirms agreement to lend the monies in a Formal Mortgage Offer and a copy will be sent to both you and your solicitor
- On completion, your solicitor draws down funds from your lender and completes your purchase. At this point, your mortgage starts.
This process generally takes between 2 to 4 weeks – significantly quicker than the legal process, but it may take longer.
We find that lenders often ask for documents on a piecemeal basis, ie, not all at once, so it is not uncommon for there to be some to-ing and fro-ing during the process.
It’s important to note that Mortgage Advisers have no influence over the legal process and therefore cannot influence the date of exchange of contracts or legal completion, beyond the provision of a formal mortgage offer.
Good communication with all parties is absolutely essential to ensure the process is smooth and happens in a timely fashion.
If you are in a house buying chain, there will be other buyers and sellers, with their own mortgages and legal processes to complete. This is much harder to control and breaks in the chain are not uncommon.
It is your responsibility to communicate with your legal team, estate agent and to respond to enquiries and requests promptly during the mortgage application process. Typically, the time taken for conveyancing is considerably longer than the taken to obtain a formal mortgage offer.
Please contact us without obligation if you would like to discuss how J Finance can assist with your mortgage process.
Established in Berkshire in 2004, J Finance Ltd is one of the leading financial planning companies in the area. We serve clients across England and Wales. If you would like to discuss this subject or any other financial matter, please contact us on 01635 521 300 or email firstname.lastname@example.org.
YOUR MORTGAGE IS SECURED ON YOUR HOME. THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.