Mortgage lenders have tightened up in a number of ways in response to Covid-19 and the economic disruptions related to it.
Earlier this year we had lenders requiring borrowers to affirm their income (i.e. that they hadn’t lost their jobs) prior to settlement notwithstanding that their finance applications had already been approved.
In response to this we inserted special conditions on behalf of purchasers that allowed purchasers to delay settlement or terminate the contract altogether if their finance, having been approved, was subsequently withdrawn by the mortgagee.
More recently, in response to the second wave, I have seen special conditions that allow parties (both vendors and purchasers) who are forced into isolation to delay settlement without penalty.
In addition, it is worth focussing on exactly what is required to trigger the standard finance condition. The standard finance condition provides that a purchaser may end the contract if the loan is not approved by the loan approval date.
However, this doesn’t address the problem of a loan that is approved subject to unexpected conditions or at a higher than expected interest rate.
For this reason, we encourage purchasers to insert a special condition that provides that a loan is only approved if it is approved on terms reasonably acceptable to the purchaser.
This is one of the issues that we cover in our Contract Review process. For $495.00 clients get a written review identifying key issues with the proposed contract, suggested special conditions and a follow up phone call. With property purchases being one of the largest financial decisions most people will make it makes sense to get the benefit of our experience with thousands of property contracts over more than 20 years.
To arrange a Contract Review please email lewis@lewisobrien.com.au.