Removal of "subject to mortgage approval clause" from purchase contract.

Emma3030

Hi all,

I started a purchase of property in June this year, and finally it seems everything is almost there, but the seller has requested to remove the "subject to mortgage approval from the legal contract.

I understand if we agree with the seller, we shall lose our first payment (10% of the property value). Just want to know if this common practice for the seller to request this?

Senna

This is a question for your solicitor, that's what you are paying him for.

What money are you losing?

Emma3030

I will lose 17k if AIB does not provide me with the mortgage for any unexpected reason. My mortgage was approved and I checked with my mortgage adviser who has confirmed that they have got all documents they require. But, I am still worried because my solicitor has not got the check yet.
My solicitor asked me today if I want to have this clause removed from the contract. I don't know if I should insist to keep this clause in the contract. I know the purchase process has been really long and I am afraid if I don't do this quickly I may not avail the interest relief because our negotiation on the term of contact will cause delay.

Procrastastudy

Emma3030 wrote: »

I will lose 17k if AIB does not provide me with the mortgage for any unexpected reason. My mortgage was approved and I checked with my mortgage adviser who has confirmed that they have got all documents they require. But, I am still worried because my solicitor has not got the check yet.
My solicitor asked me today if I want to have this clause removed from the contract. I don't know if I should insist to keep this clause in the contract. I know the purchase process has been really long and I am afraid if I don't do this quickly I may not avail the interest relief because our negotiation on the term of contact will cause delay.

While you solicitor would be in a better position to advise you I personally think you could lose more than 17K. If you agree to purchase the property and then can't get a mortgage the seller could sue you for damages (probably the amount it loses in value). Speak to your solicitor. I'd be leaving it in personally - its a buyers market at the moment. It's also a really odd thing for a seller to be doing - me thinks something else is afoot.

Senna

Why will you lose 17k, you haven't signed contracts? Is 17k the booking deposit, it is refundable unless you have signed contracts.

As i said above, you are asking a very serious question to complete random people on the internet who might not know their arse from their elbow (me included).

As i understand it, this clause in your contract is your safeguard. If the bank don't give you a mortgage you can walk away. If you allow this safeguard to be removed the vendor can insist on payment (and drag you though a court) and because you have been refused the mortgage, you wont be able to pay.

SPEAK TO YOUR SOLICITOR and i wouldn't have much faith in him/her if you have to come on here to get an answer. He/She should be explaining everything to you, if they're not, get rid of them.

djmcr

As above respondents have said get legal advice, but from my uneducated view if you sign the contract without this clause you could be getting yourself into a lot of trouble in the event that you fail to get a mortgage

Milk & Honey

Senna wrote: »

Why will you lose 17k, you haven't signed contracts? Is 17k the booking deposit, it is refundable unless you have signed contracts.

As i said above, you are asking a very serious question to complete random people on the internet who might not know their arse from their elbow (me included).

As i understand it, this clause in your contract is your safeguard. If the bank don't give you a mortgage you can walk away. If you allow this safeguard to be removed the vendor can insist on payment (and drag you though a court) and because you have been refused the mortgage, you wont be able to pay.

SPEAK TO YOUR SOLICITOR and i wouldn't have much faith in him/her if you have to come on here to get an answer. He/She should be explaining everything to you, if they're not, get rid of them.

17k is far too much for a booking deposit. It is obviously 10% of the purchase price. The O/p will lose it if he cannot complete.

Emma3030

17k including booking fee and 1st payment, total make the 10% of purchase value. i have asked my solicitor to request the check first from the bank. if we got the check, we can have this claus removed.

Anyone knows how quick AIB usu. issues checks after receiving request from solicitors?

Senna

Milk & Honey wrote: »

17k is far too much for a booking deposit. It is obviously 10% of the purchase price. The O/p will lose it if he cannot complete.

Right, didn't think people were still handing over 10% deposits. When I bought I gave the 10% to my solicitor and informed the vendor they weren't getting it till I got the keys.

juke

It's standard practice to sign contacts subject to loan approval AND drawdown of the loan cheque.

Talk to your solicitor, but with many loan offers only having a lifespan of 3 months, you'd be mad to agree.

Emma3030

juke wrote: »

It's standard practice to sign contacts subject to loan approval AND drawdown of the loan cheque.

Talk to your solicitor, but with many loan offers only having a lifespan of 3 months, you'd be mad to agree.

So my solicitor can't request the check until I sign the contract? Is this what you meant by?

killers1

Emma3030 wrote: »

Hi all,

I started a purchase of property in June this year, and finally it seems everything is almost there, but the seller has requested to remove the "subject to mortgage approval from the legal contract.

I understand if we agree with the seller, we shall lose our first payment (10% of the property value). Just want to know if this common practice for the seller to request this?

This is very common. What's happening here is that the vendor is purchasing another property with a mortgage and needs to sign contracts. One of their lenders conditions is that there are 'binding and unconditional contracts in place for the sale of their existing property' ( to you). Having the clause that your purchase is subject to mortgage drawdown means that the vendors solicitor needs to put a qualification on title to the vendors bank for their new mortgage and cannot confirm binding & unconditional contracts are in place which effects their ability to sign contracts for their purchase. If a closing date has been agreed, within the lifespan of the loan offer & well before expiry and if you have satisfied all mortgage conditions and the bank have confirmed the only item o/s to issue the funds is your solicitors request for funds you are in a position to instruct your solicitor to remove the clause. Print off this post to discuss with your solicitor. I've had 5 instances of this in the past month, all parties informed their Solictor to remove the clause & all have closed.

Bigcheeze

killers1 wrote: »

This is very common. What's happening here is that the vendor is purchasing another property with a mortgage and needs to sign contracts. One of their lenders conditions is that there are 'binding and unconditional contracts in place for the sale of their existing property' ( to you). Having the clause that your purchase is subject to mortgage drawdown means that the vendors solicitor needs to put a qualification on title to the vendors bank for their new mortgage and cannot confirm binding & unconditional contracts are in place which effects their ability to sign contracts for their purchase. If a closing date has been agreed, within the lifespan of the loan offer & well before expiry and if you have satisfied all mortgage conditions and the bank have confirmed the only item o/s to issue the funds is your solicitors request for funds you are in a position to instruct your solicitor to remove the clause. Print off this post to discuss with your solicitor. I've had 5 instances of this in the past month, all parties informed their Solictor to remove the clause & all have closed.

Exactly. This is the only informed advice in this whole thread OP.

Victor

Be very careful with this.

House prices are expected to fall sharply in January, once tax relief is no longer available. If you sign the contract, but don't get a mortgage, you could end up being sued for tends of thousands of euros.

juke

Emma3030 wrote: »

So my solicitor can't request the check until I sign the contract? Is this what you meant by?

No - contracts are signed and balance deposit paid, subject to loan approval and drawdown. You solicitor then applies for your loan cheque when you are ready to close and you have complied with all of the loan conditions

killers1 wrote: »

This is very common.

Disagree - only in so far as I haven't come across a large number of 'chains' in recent times

killers1 wrote: »

What's happening here is that the vendor is purchasing another property with a mortgage and needs to sign contracts. One of their lenders conditions is that there are 'binding and unconditional contracts in place for the sale of their existing property' ( to you).

Nothing in the OP to suggest that, but you could be right

killers1 wrote: »

If a closing date has been agreed, within the lifespan of the loan offer & well before expiry and if you have satisfied all mortgage conditions and the bank have confirmed the only item o/s to issue the funds is your solicitors request for funds you are in a position to instruct your solicitor to remove the clause.

That's the key here.

Victor wrote: »

Be very careful with this.

House prices are expected to fall sharply in January, once tax relief is no longer available. If you sign the contract, but don't get a mortgage, you could end up being sued for tends of thousands of euros.

Agree - I'm be very slow to advise my clients to allow the clause to be removed - and I've had no deals fall apart because of it.

OP talk to your solicitor - get their advice, it's what you are paying him/her for, so don't be shy.

Procrastastudy

Bigcheeze wrote: »

Exactly. This is the only informed advice in this whole thread OP.

Actually seems that your advice isn't exactly top banana either.

Emma3030

Victor wrote: »

Be very careful with this.

House prices are expected to fall sharply in January, once tax relief is no longer available. If you sign the contract, but don't get a mortgage, you could end up being sued for tends of thousands of euros.

I hope the apartment price is not to fall too much next year. I have already paid too much on this apartment.

Procrastastudy

Emma3030 wrote: »

I hope the apartment price is not to fall too much next year. I have already paid too much on this apartment.

It probably will if you're paying around 170K for it. That said there are plenty of threads on rent v buy and you're not buying at a bad time.

Move in, enjoy and be happy - don't look at house prices until you need to move again.

Emma3030

killers1 wrote: »

This is very common. What's happening here is that the vendor is purchasing another property with a mortgage and needs to sign contracts. One of their lenders conditions is that there are 'binding and unconditional contracts in place for the sale of their existing property' ( to you). Having the clause that your purchase is subject to mortgage drawdown means that the vendors solicitor needs to put a qualification on title to the vendors bank for their new mortgage and cannot confirm binding & unconditional contracts are in place which effects their ability to sign contracts for their purchase. If a closing date has been agreed, within the lifespan of the loan offer & well before expiry and if you have satisfied all mortgage conditions and the bank have confirmed the only item o/s to issue the funds is your solicitors request for funds you are in a position to instruct your solicitor to remove the clause. Print off this post to discuss with your solicitor. I've had 5 instances of this in the past month, all parties informed their Solictor to remove the clause & all have closed.

Good advice. But my vendor is actually a development company. The vendor said it is the bank (the vender's bank) who has requested to remove the clause from the contract.

As I am constantly chasing up the purchase process (for MIR reason), I think they just want to advantage me.

Emma3030

That's the key here.

I checked with my mortgage adviser, he said that it seems they have got all information required. But I had bad experience with BOI, they approved my mortgage very quick and then come back to me thousand times for additional documents and the person who was dealing on my mortgage was extremely slow in response delivery information to their mortgage approval department. I was fed up with them and applied another mortgage with AIB. Luckily, AIB has approved my mortgage with a better interest rate. AIB has requested a lot of documents from me also including my educational back ground, professional qualifications and so on. But the final offer letter i received only states that they will require to see the mortgage protection cover and the Building insurance policy.

i understand my solicitor has requested check from AIB yesterday. Anyone has experience with AIB, do you know if AIB will request further information from me based on current situation?

killers1

Emma3030 wrote: »

That's the key here.

I checked with my mortgage adviser, he said that it seems they have got all information required. But I had bad experience with BOI, they approved my mortgage very quick and then come back to me thousand times for additional documents and the person who was dealing on my mortgage was extremely slow in response delivery information to their mortgage approval department. I was fed up with them and applied another mortgage with AIB. Luckily, AIB has approved my mortgage with a better interest rate. AIB has requested a lot of documents from me also including my educational back ground, professional qualifications and so on. But the final offer letter i received only states that they will require to see the mortgage protection cover and the Building insurance policy.

i understand my solicitor has requested check from AIB yesterday. Anyone has experience with AIB, do you know if AIB will request further information from me based on current situation?

You don't seem to have much of a clue about the process and I blame your mortgage advisor for this, not you. If you have satisfied the mortgage protection & buildings insurance conditions on your loan offer and your solicitor has requested the funds the monies will issue 48 hours after the last condition has been satisfied or on whatever date is specified by your solicitor. The bank will not request further info as your loan is with the completions dept as opposed to the underwriters. With BOI you had an approval in principle subject to x,y & z and needed to produce those documents to get a legal pack issued. AIB ask all those questions up front and look for all underwriting documentation prior to issuing a legal loan offer. Your solicitor can contact AIB directly to see if all conditions have been satisfied and if so can remove the clause in relation to 'subject to loan approval & drawdown.

Victor

Emma3030 wrote: »

I hope the apartment price is not to fall too much next year. I have already paid too much on this apartment.

The immediate price fall will only really affect you if you sell between now and 2017 - with the tax relief expires. Any ongoing or subsequent price adjustments are another matter.