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 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’.
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.
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.
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.
“Our dedicated lending team is here to discuss which loan options work best for you and your needs,” said Dnister’s Lending and Member Services Executive, Ivanka Bernyk.
Get in touch
There’s a lot to plan for when you’re buying your next home. From subject to finance offers to bridging loans, upgrading can be a lot less stressful when you know the options.
Call Dnister today on 1800 353 041 and arrange to speak with a Lending Specialist or book an appointment online.
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. In providing you with this information you should consider the appropriateness of this advice with regard to your particular financial situation and needs. We advise that you carefully read our Home Loan Key Facts Sheet and TMD before acquiring a loan product. 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. Applications are subject to Dnister credit assessment criteria. Interest rates are subject to change without notice and should be verified with your local branch. Terms and conditions, including fees and charges, apply. For full details on our products and an analysis of your personal requirements, please arrange for an appointment with one of our friendly lending staff by contacting your local Dnister branch.
