Beware, your finance approval may expire after three months

Did you know that finance approvals usually expire after three months?

Three months after date of approval, most finance approvals expire and need to be re-approved if the loan is to proceed. This often requires the borrower to restart the loan application and undergo a property valuation, confirmation of income, and other processes necessary to take out a loan.

Most settlements take less than three months, so this is usually not a problem. However, in some circumstances it can lead to settlement delays.

For example, during a recent settlement, our client was purchasing a property and the seller delayed settlement due to difficulty discharging his mortgage.

After a lengthy delay, it became clear that by the time the seller was ready for settlement, our client’s finance approval would likely be out of date.

We began arranging re-approval of the loan with the client and her mortgage broker, but during the process the seller sorted out his mortgage problems and became ready to settle. By the time our client received her new finance approval, settlement was again overdue – but this time, responsibility for the delay fell on our client.

Fortunately, the delay caused on our client’s end was only one day, and the seller chose not to charge penalty interest. In other scenarios however, a longer delay or an unforgiving seller could result in hundreds or thousands of dollars in penalty interest.

To reduce the risk of settlement complications and delays, bear in mind that finance approvals usually expire three months after date of approval. By keeping this in mind during the settlement process and while writing contracts, you can help create a smooth settlement experience for buyers and sellers alike.


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