Advertisement

What if I change my mind about buying a house?

Backing out of a property purchase is not a decision to be made lightly. Here’s what happens if you change your mind about buying a house.  

 

Compare Home Loans

When can you change your mind about buying a house?

Prospective buyers can change their mind about buying a house any time before settlement – but the consequences of this are different depending on when you make the choice to pull out. If you back out of a property purchase during the cooling-off period, the financial penalty varies; if you back out once the contract is unconditional, the contract will specify the financial penalties.

Once you have exchanged contracts and paid a deposit on a property, you have a legal right over that property, called a financial interest. At this point, there is a brief cooling-off period (in most states and territories) during which you can get out of the contract if you provide written notice, but you would not get your whole deposit back in some states and territories. There is no cooling-off period if you buy at auction.

The usual cooling-off period is a different length in each state and territory:

After the cooling-off period, the contract for sale becomes unconditional and you will no longer be able to back out of the contract without significant financial penalties. The contract for sale will outline what the buyer is required to pay the seller as compensation for pulling out of an unconditional contract. These costs may include paying your own and the seller’s legal or conveyancing fees, and your own and the seller’s building valuation and inspection fees.

Any buyer considering backing out of a property purchase should obtain legal advice before breaking a legally binding contract.

Backing out of a property purchase for financial reasons

Backing out of a property purchase for financial reasons

When possible, borrowers should obtain home loan pre-approval (known as approval in principle) so that you will not have to back out of a property sale due to financial reasons. Borrowers should not sign an unconditional contract (e.g. at auction) or waive their right to a cooling-off period if they have any doubts about getting finance for a property purchase.

If your finance has been rejected and you have already paid a deposit and exchanged contracts on a property, conveyancing experts recommend that you seek immediate legal advice.

Having your home loan application rejected can damage your credit rating and make it less likely that you would be approved for a future loan.

 

 Compare Home Loans

Share this article