Why a subject to finance loan offer could be your safety net

What you should know before buying ‘subject to finance’

Why make an offer subject to finance?

In practical terms, making an offer subject to finance means an extra clause is added to the sale contract.

Essentially, it can allow the buyer to walk away from a sale with their deposit intact if mortgage finance can’t be arranged within a set timeframe.

Understandably, the seller won’t wait around forever. So, the time allowed to secure loan approval can be tight, often a matter of days.

However, a subject to finance clause could help you avoid a last minute race for finance – a pressure-cooker situation that could see you accept a loan or lender that’s not right for your needs.

Talk to Brendon at Finance Broker to see if a subject to finance clause is right for you.

Not sure if you’ll get the thumbs up for a home loan? But you really, really like that house that just popped up? Making an offer ‘subject to finance’ could be the right move. Here’s how it works.

Picture this. You’ve seen a home you’re crazy about, and you don’t want to miss out to another buyer. So, you sign on the dotted line and hand over your deposit.

Things are getting real now. But what if they’re not? What if you struggle to land a home loan?

It’s a scenario every home buyer dreads.

If you have to back out of the contract because you can’t get loan approval, you could lose your deposit.

One possible solution, however, is to make your offer ‘subject to finance’.

The downside of buying subject to finance

There is a catch to making an offer subject to finance: the seller doesn’t have to agree to it.

In today’s property market, homes are selling fast – in as little as 10 days in some neighbourhoods.

With that sort of buyer demand, there may not be much incentive for a seller to agree to an offer that’s subject to finance.

Or, if you’re buying at auction, the sale is usually unconditional. Chances are you won’t have an opportunity to alter the sale contract.

These drawbacks highlight the value of speaking to us before you go home hunting.

Having your loan pre-approved, for example, can take away a lot of the uncertainty around securing finance.

Finance Broker Melbourne is here to help.

Can I buy before I sell?

When you’re ready to climb the property ladder, another key question is often whether it’s better to sell first and buy later.

With money in the bag from the sale of your old home, you may be less concerned about making an offer subject to finance.

That said, if you see a place you want to buy before your home sells, a bridging loan could cover the funding gap.

The beauty of a bridging loan is that this type of finance usually requires interest-only payments, not principal and interest payments.

The downside is that the interest rate tends to be higher than for a traditional home loan.

Talk to us today

There’s a lot to plan for when you’re buying your next home.

Call us to streamline your purchase. From subject to finance offers to bridging loans, upgrading can be a lot less stressful when you know the options.

Book a FREE consultation with Brendon Cowan to look at whether a subject to finance clause is right your personal circumstances.

Contact Brendon

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Loyal borrowers hit with loyalty tax

Borrowers who stick with the same lender year after year are probably being slugged with...

RBA urges banks to keep lending standards high

Reserve Bank governor Philip Lowe has reminded banks they need to continue rigorously assessing home...

Property market sets new record

The total value of residential dwellings in Australia has surpassed $8 trillion for the first...

Government releasing 30,000 grant spots

From July 1, the federal government will release a total of 30,000 openings in three...

How to get a great loan in hot market

With the property market running hot, mortgage lending is at historically high levels, according to...

Banking system in good health

Australians with mortgages significantly increased their financial buffers last year, according to Reserve Bank of...

Home builder construction extension

Were you one of the 121,000 people who took advantage of the HomeBuilder grant?

Power prices fall 8.8%

Households could save $126/yr thanks to falling power prices.

Leave a Reply

Your email address will not be published. Required fields are marked *