Not sure if you’ll get the thumbs up for a home loan, but you’ve just found the perfect house on the market? Making an offer ‘subject to finance’ could be the right move. Here’s everything you need to know.
Why Make an Offer ‘Subject to Finance’?
Imagine this scenario: You’ve seen a home that ticks all your boxes and you don’t want to risk losing it to another buyer. You decide to sign the contract and put down your deposit, but there’s a lingering worry – what if you can’t secure the home loan?
If you have to back out of the contract because you can’t get loan approval, you could lose your deposit. One possible safeguard is making your offer ‘subject to finance’.
In practical terms, this means adding an extra clause to the sale contract. Essentially, it allows you to walk away from the sale with your deposit intact if you can’t arrange mortgage finance within a set timeframe.
Why is this beneficial?
- Avoid Last-Minute Scramble: It can help you avoid the pressure-cooker situation of a last-minute race for finance, which could lead to hasty decisions and potentially unfavorable loan terms.
- Financial Security: It ensures you don’t risk your deposit if loan approval falls through.
However, sellers won’t wait around forever, so the time allowed to secure loan approval can be tight – often just a few days.
The Downside of Buying ‘Subject to Finance’
There is a catch: the seller doesn’t have to agree to your terms.
In today’s competitive property market, homes are selling quickly – sometimes in as little as 10 days. With such high demand, sellers might not find it attractive to accept offers subject to finance.
Additionally, if you’re buying at auction, the sale is usually unconditional, meaning you won’t have the opportunity to modify the contract with a subject to finance clause.
These drawbacks highlight the importance of speaking with us before you start house hunting. Having a pre-approved loan can significantly reduce uncertainty around securing finance.
Can I Buy Before I Sell?
Another common question when climbing the property ladder is whether to sell your current home first or buy a new one before selling.
With money from the sale of your old home, making an offer subject to finance may not be as critical. However, if you find a place you love before selling your existing home, a bridging loan can cover the financial gap.
Benefits of a Bridging Loan:
- Interest-Only Payments: Often requires interest-only payments rather than principal and interest, easing the financial burden in the short term.
Drawbacks:
- Higher Interest Rates: Typically come with higher interest rates compared to traditional home loans.
Talk to Me Today
There’s a lot to plan for when buying your next home.
Call Me today to streamline your home purchase. From understanding subject to finance offers to exploring bridging loans, knowing all your options can make the entire process much less stressful.
0447654321
