Are you getting a home loan for your next property purchase? Are you sure that you don’t need a finance clause for your next home?
Buyers need to do their homework and get pre-approval prior to looking for their home or investment. It’s not enough for buyers to think that they have a great income. A good amount of deposit and equity will not ensure getting your loan approved quickly.
There is a risk that if your loan is not approved on time that your contract may be canceled. Lenders take time to process the loan, to do all the checking to make sure they have all the facts correct before submitting it to the approval department. Get a real pre-approval done before you start your property search.
What is a “Subject to Finance” Clause?
A subject to finance clause is a legal agreement with the seller to purchase a property on the condition that you receive a home loan approval from the bank.
If in the event that your home loan is declined for any reason, a finance clause is necessary to protect you from losing your deposit and to avoid being subjected to damages that may arise.
Why do you need It?
In some home purchase contracts, a subject to finance clause is a standard condition. This clause will give you more time to search for the right home loan for you.
Including a finance clause in your contract of sale will also protect you from situations that you didn’t even foresee. Aside from the possibility of being denied the loan approval, there might be delays from the typical approval timeframe. If the delay goes beyond your agreed timeframe with the seller, you need to find other ways to finance the purchase.
Perth’s economy is doing great right now and is even projected to grow by next year. But there are still some uncontrollable factors that can affect your employment. Sudden changes in employment can affect your loan approval.
Some lenders might provide pre-approval for your loan. This doesn’t mean that it is already safe to not include a finance clause. There are different types of pre-approval and most do not guarantee that your loan will be approved. Hence, a finance clause is still recommended.
A subject to finance clause is something that you should definitely consider adding to your sales contract. By using an experienced buyer’s agent, they will ensure the correct wording is put into the contract to protect you. The buyer’s agents will act as a third party to give you wise advice in selection, negotiations, and the special conditions you should add to the contact to protect you through to the final settlement.
In the long run, this decision can save you a lot of time, money, and stress. Contact the buyer’s agents at Buying Perth Real Estate to give you a further understanding of the ‘subject to finance’ clause in real estate.