According to the Council for Mortgage Lenders the average loan to value provided by a mortgage lender against a purchase in England during 2016 was 84%. The average loan to income ratio for the same period was 3.61. Given their financial input for a given transaction mortgage lenders seek to limit their exposure to any risks in a purchase by setting out their own specific instructions and requirements for a conveyancer, many of which a buyer will not be aware of when selecting their lender.
For a potential buyer the initial important considerations in choosing a mortgage lender will, quite rightly, be the amount that they can borrow, the interest rates available and the particular products on offer. What will not always be of an immediate consideration is as to whether the chosen lender will have any specific requirements as to the nature of the property to be purchased or the amount of control a lender has over decisions that can be made in proceeding to complete the purchase.
Most buyers will appreciate that a lender will perform a basic valuation on a property to ensure it is suitable for securing the mortgage (and potentially worth the price that has been agreed) but lenders also have requirements that they instruct the conveyancer to check specifically on their behalf and these instructions vary from lender to lender.
For a conveyancer, the mortgage lender chosen has an immediate and far ranging impact on the transaction. Knowing which lender is to be used from the outset of any transaction is important as some lenders will not instruct certain firms, or classes of the legal profession, to act for them on a mortgage. Some lenders will not allow Licensed Conveyancers to act for them and a conveyancer may need to be on the lender’s approved “panel” of professionals before they will release a mortgage offer to the firm. Some lenders will not allow a firm to act for both a seller and a buyer, even where regulatory requirements in this regard can be met by the firm.
As can be appreciated, it can cause delays and frustration for all parties if a chosen conveyancer is unable to act for the lender chosen by the buyer. In such cases a third party conveyancer may have to be appointed to act for the lender’s interest solely or, depending on the stage at which the transaction is at, a new conveyancer may need to be instructed by the buyer.
The majority of UK mortgage lenders are members of the Council of Mortgage Lenders or the Building Societies Association. The CML collates and provides the instructions for individual member lenders and makes these available to view online in the CML Lender’s Handbook. The handbook provides comprehensive instructions for the conveyancer on a wide range of matters from covering the matters a specific lender will lend on, the type of searches required by the lender through to what circumstances indemnity insurance for defects in title can be accepted.
The lender’s requirements must be met before the conveyancer will be in a position to request the release (draw down) of the mortgage funds and this will be the case irrespective of whether the buyer wishes to proceed to complete. Should a conflict of interest or instructions arise between the instructions of the buyer and the requirements of the lender the conveyancer will be unable to proceed to purchase using the mortgage lender’s funds until the conflict of interest is resolved to the lender’s satisfaction.
If a lender is not already chosen at the start of a transaction, or changes during the transaction, certain actions taken by a conveyancer may need to be repeated to comply with the new lender’s requirements. As an example, many conveyancing firms instruct “Personal” Searches (for ease of ordering and cost) at the outset of a transaction, whereby a search company will provide the answers to the Local Authority search (this includes planning information); however as this information is not provided directly by the Local Authority offices some lenders do not accept such searches and these would need repeating if the lender changed accordingly. This can potentially lead to additional delays and cost to the buyer.
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