Case Study: Avoiding Settlement Penalties
Published by MFAA
Jarrod Harrison was well on his way to becoming a first-home owner when issues cropped up prior to settlement that threatened to cost him his deposit.
Having found the house he wanted to buy and exchanged contracts for sale, Jarrod found himself considering a costly settlement extension due to unexpected problems with his deposit.
While he had thought that having a deposit sitting in his account would make the process simple, Jarrod had not realised that he needed to have the funds in his account for a minimum of three months before a lender would consider them genuine savings.
His deposit, a gift from his parents, was due to reach the three-month milestone only nine days before settlement. Certain that he would need to apply for an extension, Jarrod spoke to a MFAA accredited finance broker to see how he should go about it.
“He had wanted to request a two-week extension on settlement, but I told him not to get the extension,” Jarrod’s broker says, “it would have involved substantial penalty interest”.
Rather than having Jarrod foot a $400 per day bill for an extension, the broker jumped into organising a loan, using the strong relationships and knowledge gained over a decade in the industry to hurry the processes along.
“What I did was look at the different panels and the different policies, I called the BDMs and sent detailed scenarios to three lenders so that there were a few options in case one didn’t work out,” the broker explains.
“I managed to get a loan conditionally approved on the same day, subject to a valuation. The valuation came back the next day and it was formally approved”, the broker adds.
Not only did Jarrod’s broker find a suitable loan, he also used his expertise to ensure that it was approved on time, before settlement, without requiring an extension.