Home Loan Question about Cooling off Periods

lilyesp on 26/09/2023 - 20:04
Last edited 26/09/2023 - 20:27 by 1 other user

Hi, looking to buy a small apartment in the middle of nowhere :) ha.

1) If I do buy and put the contract conditional to financial approval - and if the cooling off period has lapsed- and the loan doesn't get unconditional financial approval, can I still backout without penalty (even though the cooling off period has lapsed)-

2) Or if I do get unconditional approval and for some strange reason during settlement period the bank cancels approval- then can I back out of the contract even when the cooling off period has lapsed- because the original contract was subject to financial approval.

Thanks

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  Hybroid on 26/09/2023 - 20:07

  Auction: No. No cooling off period at all.

  Negotiation: Possibly. Read the contract T&Cs, or preferably, get a solicitor/conveyancer to explain it to you. There's a whole schedule of charges & penalties to be aware ranging from delays to backing out completely. Many will do a whole contract review and detailed breakdown for only $100 with no further obligation or commitment.

  Above is based on NSW. Other States may differ.

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  dcep on 26/09/2023 - 20:24

  1) Cooling off =/= Finance approval

  What Is A Subject To Finance Clause?
  The Purchaser has a grace period of two days to notify the Vendor of the outcome of their loan application. If a purchaser doesn't advise the Vendor of the outcome of their loan application within the stipulated timeframe, and no extension is agreed, the contract continues as an unconditional contract in this regard.

  2) No. Not without penalty, unless both parties agreed upon.

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  Gunnar on 26/09/2023 - 20:30

  In all probabilities two No’s and even so expect a financial penalty (eg the vendor keeps your deposit but this will be stipulated in the contract)

  As above, your best bet is to ask a conveyancer about the contract. Most contracts are similar however don’t assume this because there could always be some anomaly built into a contract. I used to get my conveyancer to review all the contracts for interested properties, there was no charge associated with the review for me

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  Pcosmic on 26/09/2023 - 20:32

  If you specify 'subject to finance' and you don't get bank's approval, then no penalty as that is a legitimate reason

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    dcep on 26/09/2023 - 23:23

    It also has to specify within an agreed timeframe ? Can't be open ended / indefinite till last minute of settlement ?

    Usually people agreed on 10~14 days from contract date, for the subject to finance clause and becomes unconditional after that unless seller gets notified otherwise.

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      Pcosmic on 27/09/2023 - 00:04

      The condition is part of the contract negotiation. Normally once you agree and sign, as the buyer you will speak to your broker/bank to begin the bank approval process.

      If the bank rejects it, then you can inform the seller with the evidence and cancel the contract without penalties as the condition 'subject to finance' has been agreed.

      This only applies to private sale. In an auction, it is unconditional. So if you fail to get the bank's approval, unless you have the cash to pay for the house you will be penalised.

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        dcep on 27/09/2023 - 00:18

        The condition is part of the contract negotiation. Normally once you agree and sign, as the buyer you will speak to your broker/bank to begin the bank approval process.
        If the bank rejects it, then you can inform the seller with the evidence and cancel the contract without penalties as the condition 'subject to finance' has been agreed.
        This only applies to private sale.

        It also has to specify within an agreed / negotiated timeframe , obviously?

        Contract goes unconditional after the stipulated timeframe if seller didn't get notified otherwise.

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  AndyC1 on 26/09/2023 - 21:43

  Speak with your lawyer or conveyancer that you will be using as they can help you with the contact clauses before you sign the contract.

  If you have signed a contract then read it from cover to cover as the details you agree to are in the contract. :) ha. :) ha. :) ha. :) ha.