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Help! Going from Approved to a "Forced" Decline

Discussion in 'Property Finance' started by dtrial, 15th Jul, 2015.

  1. dtrial

    dtrial New Member

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    Hi Guys,


    I'm currently in abit of a situation:

    I've had a home loan approved on the 20th of May from a bank.

    Until now I have yet to sign the approval contract as the land that I'm buying is going to be titled only in October.

    The loan contract (which I have yet to sign), states that the offer is only valid for 21 days after its disclosure date.

    Recently, my family had an emergency situation and requires a good amount of money.

    I wanted to offer the money I which I intend to use as the deposit to help my family with this emergency situation (it will be repaid in a few months time if used).

    Therefore, I don't want to be tied up with any contract for the time being as my family may need the money at any time during these few weeks.

    I have tried speaking to the land agent regarding my situation and have put forward my withdrawal letter with the agreement of the loss of my deposit for the land.

    However, they have not been very understanding and refused to let me withdraw. Which means my only way out of the land contract is to receive a declined letter from the bank.

    My plan is to either put aside the deposit to another Australian bank or to transfer it directly to my parent's bank account (which is not based in Australia).

    As there are not enough money in the bank for the deposit, it will turn my loan approval into a declined state (after the loan offer has been revised as the old approval is no longer valid).

    I have gotten my loan from a broker and I have yet to speak to him as I know he will be bias or inclined towards me not going ahead with my plan.


    With the case above, my questions are:

    How badly will this incident affect my credit history?

    Will it be difficult for me to apply for another home loan with the same bank in the near future?


    I understand that this is not an ideal situation nor choice to make but I would greatly appreciate for any advise or opinion.

    Thank you in advance.
     
    Last edited: 15th Jul, 2015
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Not much of an effect.
     
  3. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    As you've indicated, the way to get out of this contract may be to get the finance declined. The bank will need a reason to decline the finance (it should be fairly easy to come up with something). The problem is that this will stick and you may not be able to get finance again through that bank later.

    Another problem is that if you give money to a family or friend and then they return it to you later, you'll have destroyed your 'genuine savings' record. If you're borrowing an amount that requires you to demonstrate genuine savings, you'll need to wait a period of time (between 3 and 6 months) before you can qualify for finance again.

    Pulling out of the finance will also affect your credit record, although probably not significantly enough to have a real impact on future applications.

    My experience is that land titling often takes more time than anticipated. You may find that you can purchase the property with the contract, help your family out and still get the money back before you settle the land.

    I'd also discuss this with your broker. If you're not going to proceed with the finance, they'll need to know. Obviously they won't like the situation but they'll understand the problem better than you've described it here and can probably be more helpful than we can. A good broker will do the right thing by you knowing that you're likely to buy eventually and that if you know they're putting your interests first, you're more likely to recommend them to your friends.
     
  4. pinkboy

    pinkboy Well-Known Member Premium Member

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    @Peter_Tersteeg , could the OP commercially lend this deposit money as a short term loan so as not to break his genuine savings?

    Then go to the lender and say the deposit funds are now tied up and unavailable at this time , but will be for a future transaction?

    pinkboy
     
  5. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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  6. Perp

    Perp Well-Known Member

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    I'm clearly missing something. Why not just fail to settle? Why is it so important to you for them to release you?
     
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Speak to your lawyer before you going telling the financier to kill the loan.

    Perp - so he is no sued for the loss on consequent resale.
     
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  8. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Because he'll loose the 10% deposit - at a minimum.
     
  9. tobe

    tobe Well-Known Member

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    Have you spoken to your solicitor yet? Are you sure you are still in the finance clause? Usually when your loan is approved, the solicitor will send a copy to the vendors solicitor which ends the finance clause....
     
  10. dtrial

    dtrial New Member

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    Losing the deposit is the least of my concern.

    All I really wanted to is to be able to break the contract clean and also able to apply for another loan in the future without much hassle.

    I have yet to sign the approval contract from the bank which is only valid for 21 days.

    My settlement agent has yet to send the approval letter from the bank to the seller.
     
    Last edited: 15th Jul, 2015
  11. MRO

    MRO Well-Known Member

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    Why not settle and then resell.

    I have been at the other end (seller) of a contract where the buyer simply 'disappeared'. It caused me some significant financial issues as i was relying on the quick cash settlement that we had contracted to. I had made other financial commitments based on the contract that nearly broke me when the buyer decided they would not proceed.
     
  12. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Should never count on a settlement happening until the cheque clears.
     
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  13. MRO

    MRO Well-Known Member

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    Absolutely, I learnt this lesson the hard way. That was 10 years ago and i dont plan to do it again.

    Was just hoping to give the OP some insight from my own expereince the seller may have their own issues to deal with if settlement does not proceed as previously agreed. The contract exists to protect both parties and at some point we may all be standing on the other side of the transaction. I dont want to dismiss the OP's family problems but just thought it was worth considering from a different perspective.
     
  14. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes, well worth bringing up I think.
     
  15. jpcashflow

    jpcashflow Well-Known Member Business Member

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    I would be contacting the solicitor straight away and maybe give the bank a call and them you cant go ahead with the loan for XYZ reason in terms of not having a deposit.

    But before pulling out speak to your conveyancer... this is when a solicitor is better to be used!!