Why Do Banks Request Consent Order Mortgages as Part of 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.
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 require a formal court order to ensure that all obligations are clearly defined and enforceable; final orders or property orders provide the necessary certainty for both parties and the lender.
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.
Service ability: 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. Section 90WA specifically applies to parties in a de facto relationship, ensuring they are eligible for the same stamp duty exemptions as married couples.
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. However, if the transfer is done “pursuant to an order of the court,” you can generally apply for a formal exemption. The application for consent orders must be submitted using the appropriate form, and the relevant date for the exemption is the date the court order is made.
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.
2. The Role of the Family Court in Consent Orders
The Family Court is central to the property settlement process, especially when it comes to making consent orders that are binding and enforceable. Under the Family Law Act, the court has the authority to formalize agreements between parties relating to property, financial resources, spousal maintenance, and child support, ensuring that all family law matters are resolved in a fair and equitable manner.
When parties reach agreement on how to divide their property pool or arrange financial support, they can apply to the Family Court for consent orders. This process requires the parties to submit a draft consent order that outlines the terms of their agreement, along with all the relevant information about their financial circumstances, property ownership, and any other factors that may affect the outcome. The court will carefully review all the evidence provided, including financial statements and property valuations, to ensure that the proposed orders are just and in the best interests of any children involved.
A key requirement is that both parties must have had the opportunity to obtain independent legal advice before finalizing their agreement. This helps ensure that the consent orders are made freely and with a full understanding of the legal implications. The Family Court will only make consent orders if it is satisfied that the agreement is fair, reasonable, and complies with the requirements of the Family Law Act.
Consent orders offer significant benefits in family law matters. They provide certainty and finality, allowing both parties to move on without the risk of future claims or ongoing disputes. This is particularly important in property settlement cases, where a clean break is often in the best interests of everyone involved, including children. Consent orders also help to minimize conflict and encourage cooperation, which can be crucial for families navigating separation.
To initiate the process, parties must file an application with the Family Court, accompanied by the draft consent order and all supporting documentation. The court will assess whether the orders are appropriate given the parties’ circumstances and the relevant law. If satisfied, the court will issue a sealed copy of the consent orders, making them legally binding.
In Western Australia, the Family Court of Western Australia handles these applications, following a process similar to that of the Federal Circuit Court. Regardless of the jurisdiction, the focus remains on ensuring that property settlement agreements are fair, equitable, and in accordance with the law.
By seeking legal advice and following the Family Court’s procedures, parties can secure consent orders that reflect their agreement and provide a solid foundation for their financial future. This process not only protects the interests of both parties but also supports the best interests of any children, ensuring a smoother transition after separation.
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
| Feature | Without Consent Orders | With Consent Orders |
| Stamp Duty | Full duty payable (can be $20k+) | Exempt (usually $0) |
| Bank Approval | Difficult/High Risk | Standard Procedure |
| Future Claims | Relationship remains “open” | Finality (The “Clean Break”) |
| Mortgage Transfer | Both parties likely stay on the debt | Ex-partner removed from liability |
