It’s not been a great few years for homeowners who are looking to sell up and move elsewhere. And let’s face it, first time buyers could be forgiven for despairing at the state of the mortgage market today.

I regularly talk to mortgage and economics experts in television green rooms and conference halls across the land about what the future might hold for the market. The situation is so volatile and bonkers right now, with deals flying off and on the market at ludicrous speeds and rates, that no-one will commit to what might happen even a few months down the line. All that we can suggest, is to prepare for every eventuality, or wait out the current turbulence in the hope things will settle at some point.

Of course, if you are selling or buying right now, then by far the biggest source of frustration is finding yourself trapped in ‘the chain’.

But what is the mortgage chain, how does it work and how do you get out of it? Here’s my guide.

What is a mortgage chain?

The whole concept of the mortgage chain conjures up all kinds of images. But its easiest to think of the chain as a series of buyers and sellers who are linked together because the ones in the middle are attempting to sell a property at the same time as buying another one. So each person needs the previous person in the chain to successfully carry out their part of the mortgage transaction in order to go ahead with their one.

Somewhere along the chain will be a buyer who can purchase a property up front – in other words, without needing to sell their property to buy a new one. At the other end will be a seller who isn’t relying on the purchase price of their property to buy somewhere else.

Because most people aren’t wealthy enough to be able to buy a property outright, or sell and have somewhere they can move to that doesn’t require another mortgage, it’s possible to find yourself in quite a lengthy chain of buyers and sellers. And that’s a big problem, because if just one person gets cold feet and pulls out of the deal, it can affect everyone else after them in the chain (and before them, if they decide to stay put and not sell their home).

How common is a break in the chain?

Let’s give the chain analogy a bit of a rest, shall we?!

Okay, so the collapse of agreed house sales is something I’m regularly contacted about. A worrying large number of friends or colleagues have found themselves in this position too, after the cost-of-living crisis, rising inflation and a stagnant housing market affected people’s ability to complete the sale/purchase of a home.

A number of things can cause mortgage deals between buyer and seller to fall through. Among the most common are:

  • Mortgage applications being rejected.
  • Mortgage ‘agreements in principle’ changing due to new lending criteria.
  • Rising rent costs reducing the deposit of first-time buyers.
  • Errors, mistakes and businesses involved in the process going out of business.
  • Solicitors, brokers, estate agents or other third parties making errors or – something that causes me particular concern – taking far too long over paperwork.
  • Survey problems highlighting concerns with the structure of the property.
  • Significant life events (deaths, job losses, illness).
  • The seller simply changes their mind.

My postbag is also filled with complaints from people who have found that their house sale has fallen through after meddling parents, family, friends and colleagues have encouraged the buyer to stall, ask for endless checks and surveys or get cold feet. I’ve also heard from many people who have had agreements collapse after last-minute demands to reduce the agreed asking price.

And that’s because – takes deep breath – a seller can pull out of a house sale without any legal or financial implications at any point until the contracts are signed and exchanged. It’s rare, but it’s also possible under certain circumstances to pull out after signing too (thought I’m not going to tell you how).

How to I avoid problems with a mortgage chain?

As with much of the advice I give in this column, preparing in advance is the best way to avoid problems. Getting out of a mortgage chain when you are stuck in one is much harder to do (but not impossible).

I spoke to my fellow broadcast expert and mortgage specialist Jonathan Rolande, from House Buy Fast to get his tips on how to avoid the horrors of the mortgage chain. Jonathan suggests:

Take out ‘home buyer protection’ or ‘fall through’ insurance. These policies cover you should many of the scenarios I mentioned before occur, though not for any situations caused by you. The policies cost around £70 and cover you for:

  • Valuation costs
  • Conveyancy fees
  • Mortgage fees
  • Other upfront costs

It’s worthwhile noting that, like all insurance policies, there are limits and conditions. So shop around to find the best deal for you.

It goes without saying that a good agent or broker will have fewer properties fall through compared to an average one. They aren’t magic, of course! But the best brokers know how to spot signs of a wavering seller or buyer and can act accordingly. Sometimes knowing what’s causing the underlying concerns and addressing them can prevent a deal collapsing. Asking upfront questions of the buyer can also strip out the speculators and optimists from the real buyers.

As I mentioned before, bureaucracy and paper pushing are the cause of many failed property sales. So ensure all paperwork is issued promptly and by email where possible. However, Jonathan points out that some items require a ‘wet signature’ and must be posted.

Of course, it’s not all about the broker or agent. A practical, motivated and experienced solicitor is worth using, even if they are more expensive. Look for reviews and recommendations that mention solicitors proactively pushing deals through rather than sitting back and collecting the fee. Ask about charges for hard copies of documents – and even email attachments – too.

Finally, for sellers, if you get more than one person who wants to buy the property don’t just go for the highest bid alone. A cash buyer or one with a lower ‘loan to value’ (LTV) might be a more reliable option.

How do I get help if I’m stuck in a chain?

Preparing in advance is all well and good, but sometimes you find yourself stuck in a chain regardless. So I spoke to Independent Mortgage and Equity Release Adviser, (and my other TV mortgage specialist) Jane King, to get her tips.

Jane suggests that it may be possible for one or more buyer to move in to a rental property for a few weeks/months. “I have had clients book into an Air BnB for a few weeks in order so the chain can all complete”. This isn’t going to work for everyone, but it is a practical solution”.

It may be possible to arrange a bridging loan for a couple of months if a buyer is waiting for certain funds – like an inheritance, a gift or loan from a family member – to ensure the sale goes through. But this can be expensive – and if you’re buying make sure it doesn’t impact on the mortgage.

Jane says, “If a seller loses a buyer due to affordability issues, then I have I have also seen a scenario where everyone else in the chain reduces their purchase prices slightly in order that the seller can reduce their asking price to find a buyer more quickly”. Now this requires quite a bit of communication, but it is an option.

For renters, if your tenancy is about to expire then it’s worth asking your landlord if you can remain in the property on a rolling one-month contract. This means you’re not stuck in to a new contract to rent and can complete without paying a penalty once the chain is ready to complete. You might think this isn’t a good deal for landlords, but it actually gives them more time to get a new tenant in, reducing the risk of losses on their part too. If you’re willing to allow viewings of the flat during this period it could sweeten the deal too.

Bear in mind that mortgage deals tend to last a maximum of six months, so make sure that your offer is valid if the chain is causing delays.

Finally, it makes sense to ensure that all legal matters have been dealt with as problems with this aspect of the sale/purchase could take yet more time to sort out. Bear in mind that the more links there are in the chain, the more delays at your end could cause problems further down the line… which could come back to haunt you if everyone pulls out.

Featured in Times Money Mentor – Martyn James

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