what checks do mortgage lenders do before completion in the UK?

During the application process, lenders carry out several crucial checks to ensure both the borrower and the property meet their lending criteria. These checks help lenders assess the risk and confirm that the borrower can afford the mortgage. Here’s a breakdown of the key checks performed by mortgage lenders:

Credit Check

Credit History Review:

Lenders conduct a thorough review of your credit history, examining your credit score, existing debts, any missed payments, and how you’ve managed credit in the past.

Search for New Debts:

Just before completion, lenders may perform a final credit check to ensure no significant new debts have been taken on since your initial application. New loans or credit agreements could impact your application and the lender may withdraw your mortgage offer if they feel the mortgage is no longer affordable.

Affordability Assessment

Income Verification:

Lenders verify your income by reviewing payslips, tax returns/business accounts and bank statements. They may also contact your employer to confirm your employment status and salary.

Expenditure Review:

Lenders assess your monthly outgoings, such as utilities, insurance, childcare, and debt repayments to ensure you can afford the mortgage repayments. Some lenders might request updated details before completion.

Stress Testing:

Lenders apply a stress test to see if you could still afford your mortgage if interest rates were to rise significantly, ensuring your long-term ability to manage the mortgage.

Property Valuation

Valuation Report:

Lenders arrange for an independent surveyor to assess the property’s value, ensuring it’s worth the amount being paid and that it provides adequate security for the loan.

Survey Results:

If the valuation report highlights issues like structural problems or a lower-than-expected value, the lender may require these to be resolved or might adjust the loan amount before proceeding.

Final Checks on Documentation

Legal Documentation:

Your solicitor works with the lender to ensure all legal documents are in order, verifying the property title, checking for legal disputes, and ensuring the mortgage terms comply with legal requirements.

Proof of Deposit:

The lender may ask for final confirmation of the source of your deposit to comply with anti-money laundering regulations, possibly requiring bank statements or other proof of funds.

Mortgage Offer Conditions

Conditions Fulfillment:

Lenders may include specific conditions in the mortgage offer that must be met before completion. These might include submitting additional documentation, resolving issues from the valuation, or providing proof of building insurance. The lender will check that all conditions are satisfied before releasing funds.

Anti-Money Laundering (AML) Checks

Identity Verification:

Lenders are legally required to perform anti-money laundering checks, which involve verifying your identity using documents like your passport or driving licence.

Source of Funds:

Lenders also verify the source of any funds used for the deposit or other payments, ensuring there are no suspicious transactions. Large or unusual transactions might need additional explanation.