Picture it. A seller has accepted your offer on their property and you’ve bagged a mortgage offer to buy it.
Now you’re ploughing through all the work needed to get your purchase over the line.
But what happens if, during this process, you decide to renegotiate the purchase price of the property?
You'll need to change your mortgage offer before completion.
How do I change my mortgage offer?
You just need to let your lender know about the new purchase price so they can reassess what they’ve offered you.
Unless there's been a significant change since the mortgage offer, amending your mortgage offer could be a straightforward process.
It's unlikely to require a new application form, credit search or additional verification, for example.
Say a survey has revealed a few problems that need sorting out. You've spoken to the seller and they've agreed to drop the price so that you can get them fixed.
If you don’t update your lender that the price has dropped, the property effectively costs you less. But you're still asking to borrow the same amount.
That changes the terms of the agreed contract, so you need to let them know.
Adrian Anderson, director of broker Anderson Harris, says: “From a legal perspective, any reduction or consideration in regard to the asking price must be formalised as part of the contract and the lender notified.
The loan will then be assessed on the reduced property price.
“Any change to a mortgage offer should be straightforward, but lenders vary massively in regard to turnaround times.”
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Common factors that could cause the asking price to drop
There's a lot of work to do before you get the keys to your new home.
You'll get a property survey done to check everything's in working order and as it should be in your new pad.
What type of survey do I need?
And your solicitor will carry out searches on the local area, looking into things like local planning proposals, flood risks, water supply and sewage, among others.
What are ‘searches’ when buying a home? Everything you need to know
Along the way, you may find yourself reconsidering the price you've agreed with the seller. That could be because:
the survey has highlighted issues that could affect the property's value, such as structural problems, defective wiring, Japanese Knotweed, subsidence, rot or damp
local searches have flagged up developments or issues in the local area that could affect the value of the property, such as infrastructure plans or flooding risks
your personal circumstances have changed, impacting your ability to buy the property at the original price
house prices have moved, affecting your view on what the property is worth
The good news is that you’re free to renegotiate the price at any point up until you’ve exchanged contracts in England and Wales. That’s when the deal becomes legally binding.
In Scotland, the home buying process is slightly different.
Why buying a home in Scotland is different to in England and Wales
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How do I renegotiate my mortgage offer?
Talk to your lender if you do renegotiate the price down, because the change will affect your mortgage offer. Your lender will want to reassess what they’ve offered you.
Unless there's been a significant change since the mortgage offer, amending it could be a straightforward process.
It's unlikely to require a new application form, credit search or additional verification, for example.
But it's worth remembering that in some circumstances, your mortgage offer may change quite significantly. It could even be withdrawn.
The time it takes to get an amended mortgage offer varies, and depends on the lender and the circumstances.
Pete Muglestone, managing director of Online Mortgage Advisor, says:
“Getting the seller to agree to knock a few thousand off the asking price shouldn’t cause the loan-to-value (LTV) to go over 90% and collapse the sale.
“For example, if the buyer had agreed a purchase price of £100,000 with a £90,000 mortgage, the buyer needs a £10,000 deposit.
“If the seller agrees to reduce the purchase price by £2,000, the mortgage amount also needs adjusting to 90% of £98,000 – which is £88,200.
“The buyer would then need a slightly smaller deposit of £9,800.
“The broker or lender should always look to adjust the loan figures to match the lower valuation.
In my 10-plus years of experience, lenders have always been fine so long as the LTV is maintained because they are lending a lesser amount.”
Are there any workarounds to lowering the asking price?
If your property survey does highlight any defects, stay calm and be clear about what steps to take next. Your options include:
accepting the problems and going ahead with the purchase at the agreed price
trying to renegotiate the price
asking the seller to fix the problems before you legally commit to the purchase
pulling out of the purchase altogether
First things first, talk through the property survey findings with your surveyor and get their advice.
If you want to probe further, ask specialist tradespeople to take a look. They’ll be able to give you a view on how to fix the issues, how long it will take and how much it will cost.
It’s a good idea to get a range of independent views.
If the issues haven’t put you off buying the property, you may want to renegotiate the price to account for the cost of fixing them.
You may need to provide a selection of quotes for the proposed work. But if all goes to plan, the seller will agree to knock the cost off the purchase price.
If you're struggling to persuade the seller to reduce the price to cover the cost of the work, you may consider accepting less of a reduction.
This could also appease the seller, who may be reluctant to bear the entire cost of fixing a problem they've quite happily lived with for years.
If you can put emotion to one side and think pragmatically, you'll be better placed to make the best decision.
If you don’t fancy renegotiating the price, you could ask the seller to fix the defects before you buy the property.
The seller isn't obliged to do this. But they may agree to some or all of your requests in a bid to move ahead with the sale.
If you do go down this route, include the agreement in your contract.
Ask the seller for evidence that the work has been done to a good standard and request a copy of the paperwork, such as invoices and warranties.
They’ll come in handy if you have any issues further down the line.
What if the seller offers cash-in-hand?
Be wary if the seller offers you cash to cover the cost of any problems, as any purchase is subject to the contract.
The same applies if the seller offers a deal whereby they simply give something away.
Anderson says: “The seller could do this without advising the agent, solicitors and the lender, but such situations come without protection of law and technically, the solicitor and lender should be made aware of them.
The solicitors have an obligation to advise the lender of such matters.”
So always seek advice from professionals, such as your solicitor or surveyor.
How can I avoid ‘gazundering’?
Gazundering is where a buyer lowers their offer on the property they’re buying at the last minute. It often happens just before the deal becomes legally binding.
Buyers can gazunder because they’ve spotted an opportunity to knock down the purchase price.
There can be understandable reasons for buyers wanting to lower their offer, such as new information coming to light, they've had a change in circumstances or house prices have moved down since the offer was first made.
However, there are ways a seller can reduce the risk of gazundering. They include:
setting a realistic price for the property
being open about any issues at the outset
keeping the transaction moving forward quickly.
How to stop your property chain collapsing
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