Rejected by a Lender at the 11th Hour - What Are My Options?

If property transactions aren't completed fast enough or if a lender gets cold feet, creditors can pull out of lending at the last minute. If you only have a few days to complete the transaction before you lose your deposit, you may face a race to finish the deal before you nullify your guarantee. It's an uncomfortable and stressful scenario, but you have options to explore.

Why Do Lenders Back Out?

If you are on the line with a significant deposit, it's vital you don't lose it. Losing the deposit would mean you will not only lose the property you want to buy but you will be set back financially. Deposits – especially if you are buying a high-value property – take considerable time to save. Losing a deposit in the process of purchasing a property will put you back at square one when it comes to buying and saving, which can be devastating.

Unfortunately, it's not uncommon for lenders to pull out at the last minute. Reasons will vary. A lender might pull out if you have a sudden change in your personal circumstances that your lender can't or won't accommodate. In other situations, it will be because there are issues with the property you want to buy. In some cases, a lender can withdraw their offer based on something as simple as incomplete or (innocently provided and very minor) erroneous details on a mortgage application.

Whatever's happened, in the first instance, keep a cool head. A lender pulling out at the last minute will naturally feel very unsettling, but it's what you do next that will set the tone for how many options you have.

Short-Term Finance

Short-term finance can be one such route it may make sense to explore. Provided your lender hasn't pulled out because you cannot afford the mortgage or because of something like a complete loss of income, short-term finance can provide a solution to completing the transaction.

Bridging finance (a type of short-term loan) is much more flexible than a mortgage. As long as a bridging lender is comfortable you can afford repayments, and you are on solid financial footing overall, bridging finance will be an option. Lenders will focus on the property at the centre of the deal, your net worth, and your exit – which refers to how you'll pay back the loan (more on this, later).

Because of this flexibility, lenders can often consider your case when a mortgage lender has pulled out at the 11th hour. Bridging loans are incredibly fast to arrange, and they can usually be organised in as little as a week. As a result, you can secure finance to complete the property transaction by the deadline, which is often a great relief. You'll effectively secure both your property and your deposit while buying yourself time to find a longer-term solution.

There are – as always when it comes to lending of any kind – some caveats. Bridging finance isn't a universal solution that will solve every challenge. For example, if you have significant debt, you are trying to borrow to buy a property that is significantly overvalued, or your numbers don't add up, it will not be a possibility. If your mortgage lender pulled out because there was something intrinsically amiss in your financial background, this type of finance would also be a no-go.

Exit

Bridging finance is a short-term borrowing solution rather than a 'replacement' for a mortgage. Bridging finance will allow you to borrow the money required to complete the transaction on time. It's ideal for getting you out of a tight spot (and certainly cheaper than losing a deposit) but not a long-term financing option.

Typically, in scenarios where you need to close a deal quickly, you will use bridging finance to complete the purchase. You will then have ample time to organise refinancing, usually in the form of a mortgage. It's worth noting applying for a mortgage when you have a bridging loan in place is unlikely to be as challenging or stressful as it was during the initial transaction. Enness will be on hand to help, and your broker will have plenty of time to approach lenders and negotiate a deal for you. You will also have time to iron out any of the issues that made a lender pull out in the first place if these were part of the reason the deal fell through. When refinancing is secured, you will pay back the bridging loan. Your mortgage would then be paid in monthly instalments to your new lender over several years, as usual.