Can we get out of a purchasing contract if the interest rate is different than stated?

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Can we get out of a purchasing contract if the interest rate is different than stated?

In our contract it states the price will bear interest at a fixed rate of 3.750% per year for a term of 30 years. We have been approved for the loan but the interest rate is 4.250%. Is this something we can use to get out of the contract?

Asked on April 5, 2012 under Real Estate Law, Virginia

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

For a definitive answer, bring the contract to an attorney to review with you--the specific language of the contract is critical to determing your rights under it. T

hat said, as a general matter, if the contract specifies a certain interest rate but that's not the interest rate you received, that *may* be grounds to terminate the contract, since it may be a material (or important enough) discrepancy from or violation of what you agreed to. Alternately, even if you can't terminate the contract due to this, it's possible you could get some compensation, such as a reduction in the price. To oversimply: say that the mortgage is $200k. A half-point difference would be a difference of $1,000 the first year. Suppose that over the life of the loan, the total difference in amount paid would be $18k (I'm guessing--I don't have a mortgage calculator in front of me). One option is to reduce the purchase price to save you  the money you'd otherwise lose from the higher interest rate.

Again, though, you can't answer contract questions in the abstract, so you need to have the agreement and factual situation reviewed in detail by an attorney.


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