House sale fell through after mortgage drawn down

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Chadz1988

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So I had gone sale agreed on a property. The bank approved my mortgage and everything was going well. I discussed drawing down the funds with my solicitor due to the interest rate going up soon, and if we drew down it would remain at the current rate. Because it was so close to closing, she said she would drawdown.

The issue was that the vendors solicitor had not yet signed the contracts on their behalf, and I never knew that. I asked my solicitortwice via email if they signed but didn't get a reply. And then the worst thing happened - the sellers pulled out of the sale at the last minute. They said they would sell it to me in January, but couldn't sell this year due to capital gains tax. They said I could rent the property for a lower price until January.

The bank was not happy with us having to return the funds. They called me and said I can apply again, but I wont be classed as a first time buyer. I asked why, because I've never owned a property before. And the lady said because I drew down the funds. I explained to her the situation and she said speak to my solicitor and they will be happy to have a conversation about it.

Im just worried now this will affect my application in future. And it doesn't seem fair to remove my first buyer status due to something that wasn't my fault. This whole thing has costed me alot of money and sleepless nights. I did contact the other bank where I also received approval and explained the situation to them, asking if I could apply with them again in August, and they said that will be fine.

Does anyone know if its legal to remove my first time buyer status because of this? And will this negatively affect my future application? I asked the lady on the phone and she said it wouldn't affect it, but I just want to hear what others have to say.
 
What exactly is your FTB status?

The Central Bank lending regulations?

The bank can lend you up to 4 times your salary or 2 times your salary. That is their choice.

No other lender would treat you as a Second time buyer.

Brendan
 
Brendan Burgess said:
What exactly is your FTB status?

The Central Bank lending regulations?

The bank can lend you up to 4 times your salary or 2 times your salary. That is their choice.

No other lender would treat you as a Second time buyer.

Brendan
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From what is stated, I take it they were a first time buyer, but the bank that advanced the funds will no longer class them as such. Its a very unfortunate situation.

I dont follow your on borrowing limit .? Do you mean the bank can decide whatever they want on anything including the buyers status (first time / other)?
 
The Central Bank decides that the banks can lend a maximum of 4 times income.

But that does not mean that the bank has to lend 4 times income.

Having said that, it is such a rare occurrence that a solicitor would draw down funds without a contract in place, that I doubt that the banks have a policy in place for it. It's possible that the system wrongly classifies them as a second time borrower.

Brendan
 
Its unusual alright. The OP says they have emails to solicitor about contract status but got no reply.

@Chadz1988 what is your solicitor saying about this?
 
Instructing your solicitor to draw down funds before you have exchanged contracts and agreed a closing date is very unwise.

But I guess you know that now.

I’m afraid the lady in the bank was technically correct.

You have already been advanced a housing loan and therefore are no longer a FTB for the purposes of the Central Bank mortgage restrictions and would be recorded as such on the bank’s system.

I hope the bank take a reasonable approach here and you get this sorted
 
Sarenco said:
You have already been advanced a housing loan and therefore are no longer a FTB for the purposes of the Central Bank mortgage restrictions and would be recorded as such on the bank’s system.
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Very interesting. It's such an odd situation that I suppose the CB's rules couldn't really cater for it.

But the bank could make an exception for you.

Brendan
 
It is interesting...
As you say, hopefully the bank are reasonable given they never got security or title. With the sale collapsing nothing was bought. Nothing can come of nothing.. .
 
Can the OP not use the fund to buy another property (within the approved amount) instead of returning the fund to the bank? It will just mean their payment would have started.
 
BigPineapple said:
Can the OP not use the fund to buy another property (within the approved amount) instead of returning the fund to the bank? It will just mean their payment would have started.
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The bank should demand the money back, as the loan is not secured by a mortgage. They don't do unsecured consumer credit loans in the hundreds of thousands. And they certainly would not charge 3-4 per cent on such loans.
 
Chadz1988 said:
Does anyone know if its legal to remove my first time buyer status because of this? And will this negatively affect my future application? I asked the lady on the phone and she said it wouldn't affect it, but I just want to hear what others have to say.
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As others have suggested, the bank probably has no clear cut policy for how to deal with this situation. You can probably cause a big stink and get yourself classified as an FTB again by pleading ignorance of what your solicitor was up to. But there's no guarantee. You took the risk of drawing down without knowing the other side had signed.
 
No sane solicitor would draw down funds without an instruction from their client.

The “I didn’t know what my solicitor was up to” defence won’t wash.

The OP took an enormous risk in drawing down funds to secure a particular rate before contracts had been exchanged. And it’s backfired spectacularly.
 
Your solicitor drew down funds without a signed contracts of any sort from the vendors solicitor?? I don't care what the clients instruction was. What solicitor would do that? You don't even have a signed contract to force the vendor the complete the sale. You were completely exposed. I agree that you have to take some blame but would question the solictior competence. Did they make it very clear what the risks of what you were doing??

The bank is correct. You are no longer FTB because loan was advanced....You need to figure out if you can keep the funds ( in escrow) or something that keeps the bank happy until you are ready to complete. Not sure you can afford that if you need to rent too.
 
Luternau said:
Its unusual alright. The OP says they have emails to solicitor about contract status but got no reply.

@Chadz1988 what is your solicitor saying about this?
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Basically she just said she is just as shocked as I am. And there were no signs of them not proceeding. We drew down before 5th May also to avoid interest hike. But I never knew contracts weren't signed. And she should have known better. She said I should apply again in August and see, and we'll cross the bridge when we get there. So that's all I can do now.
 
Just to clarify, the funds have presumably been returned to the lender at this stage?
 
Here's a similar scenario that seems to have worked out for the borrower -

Deal falls through after mortgage drawn down

Hi All, So the sky has fallen in!! I went sale agreed on house at the start of July. Contracts were received about 2 weeks later with a closing date of the 24th August. With agreement the closing date was pushed out a week to the 3rd September. There was an small issue with the map with land...
www.askaboutmoney.com

I suggest the OP gets his solicitor to contact the lender to try and resolve matters.
 
Chadz1988 said:
So I had gone sale agreed on a property. The bank approved my mortgage and everything was going well. I discussed drawing down the funds with my solicitor due to the interest rate going up soon, and if we drew down it would remain at the current rate. Because it was so close to closing, she said she would drawdown.

The issue was that the vendors solicitor had not yet signed the contracts on their behalf, and I never knew that. I asked my solicitortwice via email if they signed but didn't get a reply. And then the worst thing happened - the sellers pulled out of the sale at the last minute. They said they would sell it to me in January, but couldn't sell this year due to capital gains tax. They said I could rent the property for a lower price until January.

The bank was not happy with us having to return the funds. They called me and said I can apply again, but I wont be classed as a first time buyer. I asked why, because I've never owned a property before. And the lady said because I drew down the funds. I explained to her the situation and she said speak to my solicitor and they will be happy to have a conversation about it.

Im just worried now this will affect my application in future. And it doesn't seem fair to remove my first buyer status due to something that wasn't my fault. This whole thing has costed me alot of money and sleepless nights. I did contact the other bank where I also received approval and explained the situation to them, asking if I could apply with them again in August, and they said that will be fine.

Does anyone know if its legal to remove my first time buyer status because of this? And will this negatively affect my future application? I asked the lady on the phone and she said it wouldn't affect it, but I just want to hear what others have to say.
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How ridiculous. The bank clearly doesn't know what the word 'buyer' means. Complain higher up.
 
time to plan said:
The bank clearly doesn't know what the word 'buyer' means. Complain higher up.
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Complain about what exactly?

The relevant Central Bank regulations define a first time buyer as anybody who has not previously been advanced a home loan.

Well, the OP has been advanced a home loan so technically is no longer a FTB.

I'm sure this will get sorted but making a complaint is not the way forward.
 
Sarenco said:
The relevant Central Bank regulations define a first time buyer as anybody who has not previously been advanced a home loan.
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FWIW

S.I. No. 47/2015 - Central Bank (Supervision and Enforcement) Act 2013 (Section 48) (Housing Loan Requirements) Regulations 2015.

The electronic Irish Statute Book (eISB) comprises the Acts of the Oireachtas (Parliament), Statutory Instruments, Legislation Directory, Constitution and a limited number of pre-1922 Acts.
www.irishstatutebook.ie
“first-time buyer” means, subject to paragraph (2), a borrower to whom no housing loan has ever before been advanced;
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