When does mortgage become effective?

[BooomShakeTheRoom]

We’ve exchanged! After many many months of uncertainty, we’re over the moon.

I was wondering though, when is our mortgage rate fixed in? Upon exchange or completion?

Thanks!

When the money is released

The rate should have been fixed when you got your mortgage offer.

The rate is fixed from the one they’ve offered you and there will be a date on your offer as to how long they will hold it for.

If you are thinking it'll be two years (or whatever term) from the day the money is released then you are probably wrong. All my fixed mortgages have been to a date in about 2 years, give it take 3 or 4 months. The mortgages paperwork says when the fixed rate will end.

Eg: I took my current mortgage in February, it's a 2 year fixed, but the fixed period actually ends in June.

Sorry, what I meant is; if there’s a reduction in interest rates whilst we wait to complete, can I get a better deal from my mortgage provider?

Or are we locked in to our existing offer from exchange?

Just speculating.

I don't know - just speculating - but I doubt you can change after exchange because your solicitor will have already started the process of getting the funds released. I would imagine that once that "release the funds" button is pressed, then you are locked in.

I wonder as my understanding was these funds upon exchange are from the deposit - so money you already have from the bottom of the chain up. So it’s coming out of equity.

Whereas our mortgage is for the remaining balance, which starts on completion (I’m not paying for 2 mortgages in the period between exchange and completion, the new one hasn’t started yet).

Any brokers out there who can advise?

It's the completion funds I mean - they aren't instantaneous. My solicitor has told me that it takes up to 7 days for my bank to release the mortgage funds so that request is happening when we exchange.

Devils advocate though - if you pull out between exchange and completion you surrender your deposit. Surely this can’t come from the mortgage otherwise you’re in negative equity with nothing to secure it against.

Im pretty sure the money that’s transferred at exchange would therefore be your deposit which is hard cash (in theory).

Unlikely there'll be an interest rate cut any time soon anyway, not with inflation on the rise again.

Yes, we secured our rate pre the recent cut (months ago) so I’m wondering if we can still see if we can get a better rate whilst waiting for completion.

I’m not speculating on future interest rates, just wondering if I can look around for better rates now I’m between exchange and completion.

yeah, agree - it's not the deposit money I'm talking about. I don't mean that the mortgage company have handed any money over to the vendor at this stage, it's that they release the funds internally and get them ready for you to spend on your house - sort of moving them from the bank to you first.

It would be an entire new application with the risk if that failed you would still be liable but not have the funds to complete

It's a big risk to take and one that you would need to discuss with a broker.

No one knows as we don't know the terms and conditions you have signed up to, but many will allow it but you need to speak to your lender or broker.

Thanks - was wondering if it’s possible in theory, rather than if my specific situation applies. So from what you’ve said, it sounds like it’s possible.

Really? We’ve been buying this house for a year now (chain collapse) and we’ve had improved interest rates before without a whole new application - as it’s from the same provider.

It would still need to be the same £££ though, as I’m not renegotiating the offer (and can’t). It’s the interest rate that would change which wouldn’t affect the transfer of funds.

If you were a first time buyer your rate would start on completion.

Hedging on a rare cut after exchange is optimistic and you risk losing your deposit if you pull out now - I doubt any lender would be prepared to change the rate at this point. Happy to be corrected though.

Tbh I think a lot of this interest rate cut talk is propaganda. The only 2 products under 4% are Santander with a huge set up fee and Barclays which requires you to be a Premier customer with a large income. I have been following the rates closely and where they increased from the beginning of the year even though some have now dropped they are not back to where they were. I was looking at Natwest a few weeks ago which was 4.07%. They have since increased and reduced but not back to the 4.07%.

Yes, in theory, it is possible. No, you will not need a new application. But... will depend on your lender. Call them for a definitive answer.