Thinking of making an offer on a dream home but unsure about loan approval? Learn about the 'subject to finance' offer and its implications before diving in. Here’s what you need to know.
Imagine falling in love with a house and wanting to secure it before anyone else does. You eagerly sign the contract and submit your deposit, feeling optimistic about your future in the new home.
But what if securing a home loan doesn’t go as smoothly as planned?
The fear of being unable to secure loan approval is a common concern for home buyers.
If you find yourself in a situation where loan approval becomes uncertain, backing out of the contract could mean losing your deposit.
However, there's a solution: making your offer 'subject to finance.'
Why Opt for a 'Subject to Finance' Offer?
When you make an offer 'subject to finance,' you're adding an extra clause to the sale contract.
This clause allows you to withdraw from the sale and retain your deposit if you can’t secure mortgage finance within a specified timeframe.
Given the competitive nature of the housing market in Townsville, Queensland, and surrounding areas like Brisbane and the Gold Coast, timeframes for securing loan approval are often tight, sometimes just a matter of days.
While sellers may not be keen on waiting indefinitely, having a subject to finance clause can prevent you from rushing into a hasty decision regarding loan acceptance, ensuring you choose the right loan and lender for your needs.
The Potential Drawbacks of Buying 'Subject to Finance'
It's crucial to note that sellers aren't obligated to agree to a 'subject to finance' offer.
In today’s fast-paced property market, where homes can sell within days, sellers may be less inclined to entertain offers with such conditions.
Additionally, if you're purchasing at auction, sales are typically unconditional, leaving little room to negotiate contract terms.
These challenges underscore the importance of consulting with experts before embarking on your home buying journey.
Having your loan pre-approved can significantly reduce uncertainties associated with securing finance.
Should You Buy Before Selling?
Another common dilemma for home buyers is whether to sell their current property before purchasing a new one.
Selling your existing home first provides you with funds that may alleviate concerns about securing finance for a new purchase.
However, if you come across your dream home before selling your current one, a bridging loan could bridge the financial gap.
Bridging loans typically require interest-only payments, offering flexibility in managing finances during the transition period.
However, it's essential to note that bridging loan interest rates are often higher than those of traditional home loans.
Consult with Experts Today
Navigating the complexities of home buying can be daunting, but you don’t have to do it alone.
Reach out to us today to explore your options, from subject to finance offers to bridging loans. With our expertise, upgrading to your next home can be a smoother and less stressful experience.
To learn more, contact Premium Finance Group Australia at (07) 4720 8888 or email us at finance@pfga.com.au.
Disclaimer: The content of this article is general 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 situation and may not be relevant to circumstances. Before taking any action, consider your 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.
