Why are Banks and Consent Orders linked in the loan approval process?

When you separate and need to refinance a mortgage or take out a new loan to “buy out” your partner, Australian banks will almost always insist on seeing a sealed copy of Consent Orders.

This isn’t just bureaucratic red tape; it is a critical risk-management step for the lender and a significant tax-saving step for you.

Banks and Consent Orders

1. Why Banks Require Consent Orders

Banks view separation as a “high-risk” event. Without formal orders, they face two major problems:

• Financial Uncertainty (The “Re-opening” Risk): If a bank lends you money to buy out your ex based only on an informal agreement, there is nothing stopping your ex from going to court a year later to ask for more. If the court grants them a larger share of the house, the bank’s security (the property) is at risk.

• Serviceability: The bank needs to know exactly what your liabilities are. Consent Orders clarify who is responsible for which debts, whether child support or spousal maintenance is payable, and exactly how much cash you need to pay out.

2. The Legislative Connection: Stamp Duty & Section 90L

The most compelling reason for you to provide Consent Orders to a bank is the Stamp Duty exemption.

• Section 90L (for marriages) and Section 90WA (for de facto relationships): These sections of the Family Law Act 1975 provide that certain “maintenance instruments” (like Consent Orders) are exempt from duty/tax.²

   

• The Benefit: In most Australian states, transferring a share of a house from one partner to another normally triggers thousands (or tens of thousands) of dollars in Stamp Duty.³ However, if the transfer is done “pursuant to an order of the court,” you can generally apply for a formal exemption.⁴

   
   

• Bank Requirement: Banks will rarely settle a loan if they see a massive Stamp Duty bill looming that hasn’t been accounted for. They want to see the Consent Orders to ensure the transfer will be “stamped” for a nominal fee (usually $0 or a small administrative fee) rather than full duty.

3. How a Family Lawyer Assists in This Process

Navigating a bank’s requirements while simultaneously dealing with the Family Court can be overwhelming. A family lawyer bridges that gap by:

• Drafting “Bank-Ready” Orders: Banks are very specific about the wording they require to release a party from a mortgage. A lawyer ensures the orders include the necessary “machinery provisions” (the step-by-step instructions) for the sale or transfer of the property.

• Coordinating with the Lender: Your lawyer can provide the bank with a “letter of comfort” or a draft copy of the orders to speed up the valuation and finance approval process.

• Managing Third-Party Interests: Under Part VIIIB of the Act, the court can make orders that affect third parties (like banks).⁵ A lawyer ensures the bank is “put on notice” of the proposed orders, which is a legal requirement if the orders affect the bank’s mortgage.

   

• Ensuring the “Clean Break”: As mentioned earlier, the lawyer ensures the orders satisfy Section 81, giving the bank the confidence that the financial relationship is truly over.

The Summary of Benefits – Consent Orders