According to APRA's rules, banks must have specific basic requirements when evaluating if a borrower can repay a home loan. This includes a minimum serviceability buffer of 3%, which is added on top of the mortgage interest rate.
FINANCE APPROVAL FACTS FOR QUEENSLANDERS
Understanding the legal jargon of Conveyancing can be overwhelming at a time when you should be able to celebrate the purchase or sale of your house without the stress of drafting complicated paperwork. If you’ve just signed a new contract, a trusted Conveyancing Solicitor can let you rest assured your settlement contract is completely watertight.
Our boutique team at Horrocks Solicitors is specialised in all matters Conveyancing and we strive to go above with our personalised customer service to ensure that you’re guided through the process of buying or selling property with ease and efficiency.
FINANCE APPROVAL FACTS & WHAT YOU NEED TO KNOW ABOUT HOME LOANS IN QUEENSLAND
WHAT DOES ‘SUBJECT TO FINANCE APPROVAL’ MEAN WHEN BUYING A HOUSE?
The ‘subject to finance’ is a standard condition in house and land contracts as it allows the Buyer time to organise a loan with their chosen bank to complete the property purchase. This clause ensures that the Seller can choose to end the contract and not go through with the sale if the Buyer’s loan application is refused by the bank.
WHAT DOES SATISFACTORY FINANCE APPROVAL OR UNCONDITIONAL ACCEPTANCE MEAN FOR A HOUSE AND LAND CONTRACT?
Along with other contract conditions the wording of finance clauses are essential to assure the condition is accurate and legally binding. To satisfy a finance clause as approved and obtain satisfactory finance approval the conditions may include:
A. the receipt of a money deposit from the buyer made in payment to the Selling Agent of the property and/or
B. the approval of a loan or mortgage agreement from the bank of the Buyer to provide the full amount of the purchase price for settlement
There are other conditions that can be written into a finance clause but it’s best to talk with a licensed Solicitor to be sure you’re aware of all the important details. At Horrocks Solicitors our friendly paralegals will communicate on your behalf with your financier and the legal representation for the Buyer or Seller of your contract; they will follow the legal protocol to protect your interests and certify correctly if a finance clause has been satisfied.
Once all conditions of your contract are satisfied the contract is termed as now under ‘unconditional acceptance’ which in other words states that the contract is now on track to complete by settlement date without any further conditions to be fulfilled.
HOW LONG DOES IT TAKE TO GET FINANCE APPROVAL?
Most settlement contracts include a finance approval clause of approximately 14 days however it depends entirely on the Buyer’s requirements to obtain sufficient settlement funds. The following excerpts are provided via www.yourmortage.com.au
‘The time it takes to get a home loan approval can vary widely as there are many parties involved in the application process. In a situation where the buyer has prepared all the documents required, approval can be expected in as little as three to five business days. But more complex situations will, of course, take a bit more time.
Lenders offer different types of pre-approvals, which can range from a simple two-minute online application to a formal document. If possible, you will want to avoid non-formal, non-written applications as they have far fewer guarantees and can come with many unknown conditions that you must meet at a later date.
A pre-approval will only be reliable if it is formal, written and signed by the lender. Securing a formal pre-approval is the only way to make sure you can negotiate with sellers confidently. Without a signed letter, some sellers and real estate agents will not accept your offer, as they cannot guarantee that you will be able to get the necessary finance.
An approval is formal when the lender has everything they need and can confirm in the form of a letter that they are willing to lend you money. This is the final guarantee that you will need for the property purchase. In some instances, they may just ask for additional documents before finalising the approval. This is normal for complex applications or when you have not provided everything they need upfront.
Once your offer has been accepted by a seller, you may have a one to three-week grace period to get your finances and deposit in order. During this time, you can check with your lender and make sure they will honour the agreement. Even if you don’t have this grace period, contact your lender and make sure they will finance your loan.’
WHAT ARE THE DIFFERENT TYPES OF HOME LOANS AVAILABLE?
If you’re buying a house and need to find a home loan to complete the purchase it's essential to work out what exactly you need from your loan and how much it will cost you in fees. The Money Smart website provided by the Australian Government outlines the types of homeloans available and what you need to think about before you apply for one.
Here’s a quick list of different home loans that you may be interested in:
PRINCIPAL & INTEREST HOME LOAN
INTEREST ONLY LOAN
VARIABLE, FIXED & SPLIT RATE HOME LOANES
REDRAW, OFFSET & LINE OF CREDIT
PORTABILITY
BRIDGING LOANS, LOANS FOR BUIDING OR RENOVATING
VENDOR FINANCE
A definitive guide to the different types of loans and their repayment conditions is available to read here www.moneysmart.gov.au/borrowing-and-credit/home-loans/choosing-a-home-loan
5. CAN MY PARENTS ACT AS MY FINANCIAL GUARANTORS & HOW DOES IT WORK?
If your parents are able to help you buy a house there are a few different ways to structure a guarantor loan. To start they have the option of using the equity in their own home and with this they can provide security over the entire loan or just a portion. There are many factors to consider with family guarantee home loans and it’s best to talk through all your options with your financier.
6. AM I ELIGIBLE FOR THE QUEENSLAND HOUSING FINANCE LOAN?
The Queensland Housing Finance Loan may be available for Queenslanders who can afford to buy or build a home but cannot get private finance from a bank or building society. This loan can be used to buy an established house, unit, town-house or duplex, or to build a house.
To be eligible for the loan you must:
live in Queensland and be a citizen or permanent resident of Australia
not own or part-own another property
have a household income under $141,000 per annum
intend to live in the home
have a good credit history
have no significant debts
have a regular savings history
have savings to cover the deposit and other costs, such as legal fees, stamp duty and insurance
be able to afford the loan repayments without hardship
have earning potential for the term of the loan.
7. HOW TO GET THE FIRST HOME OWNER’S GRANT?
If you are buying or building a new home, you could be eligible for the Queensland First Home Owners' Grant. The Queensland First Home Owners’ Grant is a Queensland Government initiative to help first home owners to buy their new first home. Read more about how to apply on our FHOG post here.
We’ve compiled our ‘Top Checklist’ for all your Unconditional Finance Approval FAQs but don’t hesitate to contact us today if you’d like a free fixed quote for your new conveyancing contract in Queensland.