Can I cancel a home loan before settlement?

Can I cancel a home loan before settlement?

The settlement is the last step in the home buying process, when the lender provides the funds for you to purchase the property and register a mortgage against the title of your new home. 

However, it’s possible that you may change your mind about buying a home before the sale is finalised. Perhaps you no longer like the house as much or there’s a change in your financial or personal circumstances. These things do happen and, as a buyer, you have the right to cancel your home loan application any time before the settlement or when the loan is handed over.

Cancelling a home loan before settlement

Even though you have the option of cancelling a home loan before settlement, it is worth going through your home loan agreement to check for any applicable penalties and breach of contract clauses. It is also a good idea to discuss your situation with a solicitor, conveyancer, or any such legal representative to be sure of your options and their consequences. 

Talking about penalties, cancelling your home loan and cancelling the sale are two different things. Most sale agreements cater for a cooling-off period following the signing of the contract that gives you time to change your mind about the purchase. Suppose you have signed a contract with a three-day cooling-off period. On the next day, if you decide that the house is no longer right for you, you can terminate the contract within the cooling-off period without being in breach of contract or losing your deposit. That being said, the rules around cooling-off may differ in different states and territories. Your contract might also contain provisions that prevent a change of heart in the days after you’ve made the sale. Therefore, it is important that you read your contract thoroughly before cancelling the sale and also discuss your position with a legal professional to ensure you understand the terms correctly.

Coming to your home loan, if the sale is terminated within the cooling-off period, you can cancel your loan as well - though there may be penalties. You may lose your deposit and might be held in breach of contract if you choose to cancel after the cooling-off period has expired. As always, it is advisable to go through your home loan agreement and seek legal advice to be sure of the penalties and next steps. 

If you have decided to cancel your home loan application before settlement, the process is simple. Just call up your lender to inform them of your decision. After you have explained your situation, the lender will proceed with the cancellation and inform you of any possible financial implications. It is advisable to follow up your phone conversation with a letter or email, stating the date and reason for cancellation along with the other details of the agreement. The mortgage should stop once the lender receives written communication from you. You may also keep a copy of this letter in your records for future purposes.

Can I switch lenders during the cooling-off period?

It is possible that you don’t want to cancel the sale, but switch lenders before the property is settled. Perhaps you found a better deal or are simply unhappy with the services of the lender you chose. In this situation, you would need approval from the new lender and may have to pay penalties to the old lender. Also, your sale contract may be contingent upon the finance and terms you had previously secured from your chosen lender. It would be a complicated arrangement and you would need to get advice before going down this path.  Another option is to take the loan with the lender who has approved your finance and switch to another lender after the settlement process ends. 

Can I cancel a home loan after disbursement?

No, you cannot cancel a home loan after receiving the money. You can get out of the home loan however if you sell off the property or refinance to another lender. If you already own a house and are finding it difficult to make your monthly repayments, you may consider switching to a lower interest rate mortgage to reduce your costs. You can also switch lenders to unlock the equity in your house to pay for renovations or other projects. In any case, it is worth defining your refinancing goal and working out the cost of switching to make an informed decision. A mortgage broker can help you in crunching the numbers and provide you with suitable home loan options for your requirements.

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This article was reviewed by Kate Cowling before it was published as part of RateCity's Fact Check process.

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Learn more about home loans

How do I apply for a home improvement loan?

When you want to renovate your home, you may need to take out a loan to cover the costs. You could apply for a home improvement loan, which is a personal loan that you use to cover the costs of your home renovations. There is no difference between applying for this type of home improvement loan and applying for a standard personal loan. It would be best to check and compare the features, fees and details of the loan before applying. 

Besides taking out a home improvement loan, you could also:

  1. Use the equity in your house: Equity is the difference between your property’s value and the amount you still owe on your home loan. You may be able to access this equity by refinancing your home loan and then using it to finance your home improvement.  Speak with your lender or a mortgage broker about accessing your equity.
  2. Utilise the redraw facility of your home loan: Check whether the existing home loan has a redraw facility. A redraw facility allows you to access additional funds you’ve repaid into your home loan. Some lenders offer this on variable rate home loans but not on fixed. If this option is available to you, contact your lender to discuss how to access it.
  3. Apply for a construction loan: A construction loan is typically used when constructing a new property but can also be used as a home renovation loan. You may find that a construction loan is a suitable option as it enables you to draw funds as your renovation project progresses. You can compare construction home loans online or speak to a mortgage broker about taking out such a loan.
  4. Look into government grants: Check whether there are any government grants offered when you need the funds and whether you qualify. Initiatives like the HomeBuilder Grant were offered by the Federal Government for a limited period until April 2021. They could help fund your renovations either in full or just partially.  

Can I take a personal loan after a home loan?

Are you struggling to pay the deposit for your dream home? A personal loan can help you pay the deposit. The question that may arise in your mind is can I take a home loan after a personal loan, or can you take a personal loan at the same time as a home loan, as it is. The answer is that, yes, provided you can meet the general eligibility criteria for both a personal loan and a home loan, your application should be approved. Those eligibility criteria may include:

  • Higher-income to show repayment capability for both the loans
  • Clear credit history with no delays in bill payments or defaults on debts
  • Zero or minimal current outstanding debt
  • Some amount of savings
  • Proven rent history will be positively perceived by the lenders

A personal loan after or during a home loan may impact serviceability, however, as the numbers can seriously add up. Every loan you avail of increases your monthly installments and the amount you use to repay the personal loan will be considered to lower the money available for the repayment of your home loan.

As to whether you can get a personal loan after your home loan, the answer is a very likely "yes", though it does come with a caveat: as long as you can show sufficient income to repay both the loans on time, you should be able to get that personal loan approved. A personal loan can also help to improve your credit score showing financial discipline and responsibility, which may benefit you with more favorable terms for your home loan.

What is a secured home loan?

When the lender creates a mortgage on your property, they’re offering you a secured home loan. It means you’re offering the property as security to the lender who holds this security against the risk of default or any delays in home loan repayments. Suppose you’re unable to repay the loan. In this case, the lender can take ownership of your property and sell it to recover any outstanding funds you owe. The lender retains this hold over your property until you repay the entire loan amount.

If you take out a secured home loan, you may be charged a lower interest rate. The amount you can borrow depends on the property’s value and the deposit you can pay upfront. Generally, lenders allow you to borrow between 80 per cent and 90 per cent of the property value as the loan. Often, you’ll need Lenders Mortgage Insurance (LMI) if the deposit is less than 20 per cent of the property value. Lenders will also do a property valuation to ensure you’re borrowing enough to cover the purchase. 

How long does ANZ take to approve a home loan?

The process of applying for a home loan usually stays the same across all lenders. On the other hand, the time it takes for a lender to approve the home loan differs from lender to lender. When it comes to ANZ, it takes anywhere between 15 to 18 business days to approve a home loan from the day of the application to approval. This timeframe is highly dependent on the credibility and availability of your documentation. You can apply for an ANZ home loan in two ways; a Quick Start home loan application or a full online application.

If you opt for the Quick Start home loan option, you’ll need to fill out a form with basic details. During this stage, you don’t need to add any supporting information. An ANZ representative will then call you within 48 hours. The representative will help take your application forward, including assessing all relevant information, documentation and conducting a credit check.

You can also submit your entire home loan application with ANZ online by filling out a comprehensive form with all the information and documentation needed.

Once ANZ has conducted the preliminary checks, you’ll be informed of the pre-approved amount they’re willing to offer. Based on this amount, you can set a budget for your property search and make sure you stay inside your budget. Pre-approval will last for three months but can be extended by applying with ANZ if you don’t find a property. But it’s best to find a property as soon as possible as ANZ may decide to change the amount if your financial situation changes.

After you find a property and have your offer accepted, ANZ may send an assessor to the property to verify it’s value. If everything is per their terms and conditions, ANZ will finalise your home loan’s approval and release the funds.

How to apply for a home loan pre-approval from St. George?

By applying for a home loan pre-approval, you can establish how much you can afford to borrow and look for houses within that pre-approved budget. Getting home loan pre-approval from St. George is a fairly simple process that can be completed within 15 minutes. 

The first step in this process is completing a home loan application. Once that application is submitted, a home loan expert from St. George will contact you to understand your requirements and your current financial position. You could also directly contact a home loan expert at the bank by calling 13 33 30 or by visiting your nearest branch. 

Once the application has been processed, the home loan expert will ask for some basic documentation to confirm your borrowing capacity. After this, you should be issued a home loan pre-approval, subject to certain conditions. 

Based on your home loan pre-approval from St. George, you can then find a property and make an offer. Your home loan expert will arrange to have the property valued and may request for more documentation, taking your home loan application to the next step. 

 

 

Can first home buyers apply for an ING home loan?

First home buyers can apply for an ING home loan, but first, they need to select the most suitable home loan product and calculate the initial deposit on their home loan. 

First-time buyers can also use ING’s online tool to estimate the amount they can borrow. ING offers home loan applicants a free property report to look up property value estimates. 

First home loan applicants struggling to understand the terms used may consider looking up ING’s first home buyer guide. Once the home buyer is ready to apply for the loan, they can complete an online application or call ING at 1800 100 258 during regular business hours.

How do I apply for Westpac’s first home buyer loan?

If you’re a first home buyer looking to apply for a home loan with Westpac, they offer an online home loan application. They suggest the application can be completed in about 20 minutes. Based on the information you provide, Westpac will advise you the amount you can borrow and the costs associated with any possible home loan. 

You can use Westpac’s online mortgage calculators to estimate your borrowing power. You can also work out the time it might take to save up for the deposit, and the size of your home loan repayments

When applying for a home loan with Westpac, you’re assigned a home finance manager who can address your concerns and provide information. The manager will also offer guidance on any government grants you may be eligible for. 

Is a home equity loan secured or unsecured?

Home equity is the difference between its current market price and the outstanding balance on the mortgage loan. The amount you can borrow against the equity in your property is known as a home equity loan.

A home equity loan is secured against your property. It means the lender can recoup your property if you default on the repayments. A secured home equity loan is available at a competitive rate of interest and may be repaid over the long-term. Although a home equity loan is secured, lenders will assess your income, expenses, and other liabilities before approving your application. You’ll also want  a good credit score to qualify for a home equity loan. 

Can I get a home renovation loan with bad credit?

If you're looking for funds to pay for repairs or renovations to your home, but you have a low credit score, you need to carefully consider your options. If you already have a mortgage, a good starting point is to check whether you can redraw money from that. You could also consider applying for a new home loan. 

Before taking out a new loan, it’s good to note that lenders are likely to charge higher interest rates on home repair loans for bad credit customers. Alternatively, they may be willing to lend you a smaller amount than a standard loan. You may also face some challenges with getting your home renovation loan application approved. If you do run into trouble, you can speak to your lender and ask whether they would be willing to approve your application if you have a guarantor or co-signer. You should also explain the reasons behind your bad credit rating and the steps that you’re taking to improve it. 

Consulting a financial advisor or mortgage broker can help you understand your options and make the right choice.

What does unconditional approval from Aussie Home Loans mean for first time home buyers?

As an Aussie home loan first time home buyer, your loan application passes through multiple stages. Early in the process, you’ll receive conditional approval, which means the lender approves your loan application as long as you meet certain conditions. Some of these criteria include selling another property or repaying existing debt.

The next stage is unconditional approval which is the final decision from the lender. After considering all the relevant information, the lender is willing to offer you a certain amount to buy a specific property.

Unconditional approval is also known as formal or full approval but receiving this doesn’t mean you need to accept the money. If you choose to proceed and accept the funds, you’ll sign the loan documents to finalise the loan and receive the money. You can, at this time, clarify any doubts you have with your Aussie broker.

You’re likely to get conditional approval, sometimes called pre-approval, when you want to get clear on your budget. You’ll then apply for unconditional or formal approval once you’ve found a property and made an offer. This process will involve the lender reviewing your finances and the details of the property you wish to purchase to make sure you can repay a loan on that property.

As a first time buyer, it may help you with the purchasing process to seek pre-approval or conditional approval. This may speed up the final purchasing process and help you through the home loan process in steps rather than all at once.

How do you determine which home loan rates/products I’m shown?

When you check your home loan rate, you’ll supply some basic information about your current loan, including the amount owing on your mortgage and your current interest rate.

We’ll compare this information to the home loan options in the RateCity database and show you which home loan products you may be eligible to apply for.

 

How can I apply for a first home buyers loan with Commonwealth Bank?

Getting a home loan requires planning and research. If you are considering a home loan with the Commonwealth Bank, you can find the information you need in the buying your first home section of the bank’s website.

You can see the steps you should take before applying for the loan and use the calculators to work out how much you can borrow, what your monthly repayments would be and the upfront costs you’d likely pay.

You can also book a time with a Commonwealth first home loan specialist by calling 13 2221.

CommBank publishes a property report that may help you understand the real estate market. The bank has also created a CommBank Property App that you can use to search for property.  The link to download this app is available on the same webpage.

If you are eligible for the First Home Loan Deposit Scheme, CommBank will help you process your application. The scheme helps first home buyers to purchase a home with a low deposit. You can read details about this scheme here and speak with a CommBank home lending specialist to understand your options.

Can you remove a cosigner from a home loan?

Taking out a home loan is an act of financial responsibility and a cosigner on a home loan shares that responsibility. For this reason, removing a cosigner from a home loan may not be straightforward. Usually, you can add a cosigner, or become a cosigner, when applying for the home loan. In such a circumstance, the lender may ask you to stipulate the conditions for a cosigner release, which are the terms for removing a cosigner from the home loan. For instance, you may agree that you can remove a cosigner once half the loan amount has been repaid.

However, not stipulating such conditions doesn’t mean it’s impossible to remove a cosigner. If the primary home loan applicant has a sufficiently high credit score and has not delayed any repayments, the lender may be willing to remove the cosigner. You should confirm that doing so doesn’t affect the terms of the loan. If the lender doesn’t agree to remove the cosigner, the primary home loan applicant may have to refinance the loan in order to do so. If there were specific reasons for needing a cosigner and those reasons are still valid, then you may have some challenges with refinancing.

Cash or mortgage – which is more suitable to buy an investment property?

Deciding whether to buy an investment property with cash or a mortgage is a matter or personal choice and will often depend on your financial situation. Using cash may seem logical if you have the money in reserve and it can allow you to later use the equity in your home. However, there may be other factors to think about, such as whether there are other debts to pay down and whether it will tie up all of your spare cash. Again, it’s a personal choice and may be worth seeking personal advice.

A mortgage is a popular option for people who don’t have enough cash in the bank to pay for an investment property. Sometimes when you take out a mortgage you can offset your loan interest against the rental income you may earn. The rental income can also help to pay down the loan.