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

1. 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.

2. 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.

3. 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.’

4. 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.

BUYING IN QLD WITH THE NEW FIRST HOME LOAN DEPOSIT SCHEME

THE First Home Loan Deposit Scheme IN QUEENSLAND

The First Home Loan Deposit Scheme (‘FHLDS’) was announced during the recent Federal election.

The new rules will provide that first-time buyers need only save a 5% deposit when they purchase a new property. Currently most banks and financiers require a 20% deposit before they will consider providing finance for the purchase of a residential property.

The FHLDS will guarantee loans through the National Housing Finance and Investment Corporation. 

Not only will it mean that First Home Buyers do not have to save more for the deposit but they may avoid having to pay for mortgage insurance which is often thousands of dollars.

The new policy is due to come into effect from 1 January 2020.

To be eligible individuals cannot be earning more than $125,000 per year or for couples, more than $200,000 per year.

However, the scheme is only available for the first 10,000 first home buyers.

FIRST HOME SUPER SAVER SCHEME

The FHSS (First Home Super Saver Scheme) scheme was introduced by the Australian Government in the Federal – Budget 2017-18 to reduce pressure on housing affordability.

From 1 July 2017 you may make voluntary contributions into your superannuation fund to save for your first home. 

After 1 July 2018 you can apply for the release of your voluntary contributions along with any earnings from the investment of these contributions to go towards the purchase price of your first home.

To be eligible to make use of the FHSS scheme it is required for you to live in the property that you purchase for at least 6 months immediately within the first 12 months after settlement. The house or unit cannot be an investment property that you plan to rent out.

If you plan to use the scheme then you need to apply for and receive confirmation before you sign a contract to buy. It also must be your first home.

Once you receive consent to apply the scheme you can then sign your contract and afterwards apply for release of your FHSS amounts. However be it’s important to know that it may take between 15 and 25 business days to receive the FHSS funds. Therefore, it is essential that before you sign your contract that you: have confirmation and that you make sure that you have a lengthy settlement date if you need the FHSS funds to pay to the Seller on settlement day. 

You have 12 months from the date you make a valid request for release of your FHSS amounts, to do one of the following:

• sign a contract to purchase or construct your home – and give notice within 28 days that you have signed the contract

• recontribute the assessable FHSS amount (less tax withheld) into your super fund – and you must give notice within 12 months of the release request date that you have recontributed

If you don't give notice that you have done one of the above or you choose to keep the FHSS money, you will be subject to the FHSS tax. This is a flat tax equal to 20% of your assessable FHSS released amounts. This may not be the same as the total amount released.

If you have any questions regarding your requirements for the Australian Taxation Office and the First Home Loan Deposit Scheme in Queensland contact the Horrocks Solicitors team today at 07 3013 2300

Who is eligible

You can start making super contributions from any age. However, you must be 18 years old or older to request a determination or a release of amounts under the FHSS scheme.

Also, you must have:

• never owned property in Australia – this includes an investment property, vacant land, commercial property, a lease of land in Australia, or a company title interest in land in Australia (unless the Commissioner of Taxation determines that you have suffered a financial hardship)

• not previously requested the Commissioner to issue a FHSS release authority in relation to the scheme.

Eligibility is assessed on an individual basis. This means that couples, siblings or friends can each access their own eligible FHSS contributions to purchase the same property. If any of you have previously owned a home, it will not stop anyone else who is eligible from applying.

Financial Hardship Provision

You may still be eligible even if you have previously owned property in Australia, if it is determined that you have suffered a financial hardship that results in a loss of ownership of your property interests. The types of events that could result in the loss of property interests include:

• bankruptcy

• divorce, separation from a de-facto partner, or a relationship breakdown

• loss of employment

• illness

• being affected by a natural disaster

• being eligible for early access to superannuation.

How to apply for financial hardship

If you want to be considered under the financial hardship provision you can apply with either:

ATO online using your myGov account linked to the Australian Tax Office

or by completing a First Home Super Saver scheme Hardship Application Form.