Is Financial and Independent Legal Advice Mandatory?
When obtaining a loan in Australia, applicants are required to seek financial and independent legal advice. The 1980s saw disarray in lending practices that led to a host of lawsuits in the 1990s. To avoid another decade of lawsuits, lenders got together with the Law Society of NSW to set down a group of standards.
Financial and legal advice means procuring outside counsel on the contents of the loan documentation, application, and contract. There’s a lot of fine print in those stacks of papers. A savvy individual with legal and finance knowledge might be able to confidently navigate through the jargon. However, others will not read through it simply because there’s so much to digest.
Situations where individuals can receive a waiver on the counsel do exist. Those situations include dollar-for-dollar refinancing even though additional funds are necessary to cover the costs of processing the application. If an interest rate is going to be reduced, no outside counsel is necessary. In these two examples, the applicant would seek a Level 1 DLA waiver.
When the applicant seeks outside counsel, the financial and legal advice providers must be two separate entities to avoid a conflict of interest.
Financial and Independent Legal Advice Conclusion
All lenders have a mandate to ensure applicants have sought financial and independent legal advice before the loan closes. Part of the application process includes providing proof. If a client rejects seeking outside counsel, a lender has the right to reject the application. Some situations qualify for a waiver. For more information, contact our Mortgage House loan specialists who also offer information about current home loan rates.