Advice For Borrowers
Property & Conveyancing
Newcastle's legal experts in financial advice
It is extremely important for borrowers to have a solid understanding of the risks and potential pitfalls when borrowing money. Entering a financial or contractual obligation is a major responsibility and having expert legal advice provides borrowers with a clear understanding of the entire process.
The borrower receives value from the lender on the condition that the borrower will pay the principal amount plus any interest to the lender in the future. As a borrower it is in your best interest to have clear documentation of a transaction to avoid a dispute in the future. Commonly, the lender will prepare an agreement and give it to the borrower and their legal representative to review.
The borrower has various obligations under a loan agreement, which will differ depending on the terms of the agreement.
How Burgess Thomson can help
Burgess Thomson’s team are skilled and experienced in reviewing loan agreements. We can offer you, independent legal advice and the wisdom to negotiate if necessary. Our legal team are here to ensure that every client is met with a sense of ease and security when entering into a loan agreement. We also understand the urgency associated with mortgages and land transactions and can act quickly to ensure you receive your desired outcome.
We can conduct property searches and obtain reports, assist with loan application preparation, liaise with banks and other financial institutions and arrange settlements on PEXA. Our straightforward, easy to understand advice will help you make an informed decision about borrowing and loan agreements.
Find out more about how we can help Buying Property.
What are some potential risks for Borrowers?
One of the biggest risks borrowers face when entering into a loan agreement is not being able to afford the ongoing commitment to your lender. Depending on the terms of the agreement, borrowers have a time sensitive responsibility to the other party. They must adhere to the terms of the financial agreement or face legal repercussions. Not conforming to the agreement could damage the individual’s reputation and chance of borrowing in the future.
When should a borrower seek legal advice?
When entering into a financial agreement it is recommended that both parties seek legal advice from the beginning. Borrowers will benefit from having legal consultation as they ensure all terms are understood and documentation is accurate.
What documents are required from borrowers for a home loan?
There are a number of key documents you will need to provide in order to be successful for a home loan.
- Personal identification – this will include a form of primary identification and is important so that the lender can verify your identity.
- Income details – you will need to prove you have a regular, ongoing income. This can be shown through providing a copy of your two most recent payslips and your most recent payment summary.
- Home Loan situation – depending on whether you are a first home buyer or a frequent investor you will have to provide different documentation.
- Assets and liabilities – you will need to prove that you can repay the loan. Assets can include bank account details with savings, while liabilities can mean providing details of any existing loans.
What interest will i pay on a loan agreement?
A fixed-fee interest or floating fee interest rate will set the rate of interest payable throughout the term of the loan. A fixed fee interest rate is set at a given number that will not change during the term of the agreement unless agreed to by both parties. A floating fee will be based on an interest margin added to a benchmark rate. In Australia, this will be the bank bill swap rate (BBSW), which adjusts with the Reserve Bank of Australia’s cash rate target.
Guarantors – are they necessary?
In most instances banks and lenders will require a guarantor to guarantee a loan when the borrower is either a company, the borrower has insufficient equity or lacks borrowing capacity.
However, guaranteeing someone else’s loan carries extreme risk. The guarantor will often have no control over whether the borrower complies with their obligations or defaults on the loan. Lenders will commonly insist that the guarantor obtain independent legal advice before allowing them to guarantee a loan.