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You can cancel a loan application at any time before you sign the loan agreement and the funds are dispersed. One exception is mortgage refinancing loans which offer a longer window. The easiest ways to initiate the cancellation are by phone or email. Either way, the procedure is the same.
If your lender informs you that its mortgage offer is being withdrawn and will be replaced with another offer with a higher interest rate, get advice from your mortgage broker. It may be able to advise you on what your options are and the next best deal.
You may have a three-day window to cancel the application and recover any paid fees. Tell the lender you want to cancel the pending application and provide a reason. Explaining the situation will help the lender understand any future needs. Next, go through your application with your lender.
It might delay your house purchase, as you'll likely have to reapply for a mortgage. After exchange of contracts - Offers withdrawn after exchange of contracts usually happen because the offer has expired, and you'll usually need to reapply for a mortgage. You may lose your deposit and need to pay conveyancing fees.
If you are buying a home with a mortgage, you do not have a right to cancel the loan once the closing documents are signed. If you are refinancing a mortgage, you have until midnight of the third business day after the transaction to rescind (cancel) the mortgage contract.