Concerned about clause in Conditional approval of Loan

Discussion in 'Loans & Mortgage Brokers' started by Geekyebony, 3rd Jan, 2020.

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  1. Geekyebony

    Geekyebony Active Member

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    Experts in the house, thanks for always answering my questions. i'm back with a question once again. I just got a conditional loan approval from one of the Big 4 banks and i am really concerned about one of the conditional clauses which goes as follows:
    • Lending does not exceed a percentage of BANK X valuation of the property (to be determined by BANK X at its discretion)
    Does this mean that the bank can later say to me that they can only borrow me 60% or 70% or 80% of the Valuation amount basically at their discretion? Is this a normal clause ? why cant they be specific and say lending cannot exceed 90% of the valuation of the property ?

    It almost seems to me that this clause is a scheme that could lead a customer to having no choice but to cross collateralize two properties that are already with same bank/

     
  2. Jess Peletier

    Jess Peletier Mortgages, Finance & Property Strategy Aust Wide Business Member

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    Hey there - this is only a condition of approval and it's not ongoing. It's basically just saying the valuation has to come in as expected.

    I'm pretty sure the discretion post means they can reject the property of for example the risk ratings weren't too their liking.
     
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  3. Marg4000

    Marg4000 Well-Known Member

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    It is exactly as stated. The bank will decide on the % loaned after valuing the property and considering all angles.

    Example - you buy a basic apartment in an over-supplied city suburb. Bank may decide to lend only 60% of value as they perceive there is a real possibility of declining values.
     
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  4. Trainee

    Trainee Well-Known Member

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    This is one reason people dont rely on conditional loan approvals, but on the experience of their mortgage broker.
     
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  5. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    basically pre-approvals don't mean much, there are many ways lenders won't have to honour them.
     
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  6. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    This is normal, nothing to be concerned about. My main concern would be if the lender has performed a proper assessment of your finances. Pre-approvals are worthwhile to answer certain questions, but only if they're properly assessed.
     
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  7. The Y-man

    The Y-man Moderator Staff Member

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    Unless it's OTP? :eek:

    The Y-man
     
  8. Lindsay_W

    Lindsay_W Well-Known Member

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    Don't let it keep you up at night (noticed you posted at 12:41 AM :D)
     
  9. Geekyebony

    Geekyebony Active Member

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    Thanks Guys !
     
  10. Geekyebony

    Geekyebony Active Member

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    What is OTP ? google gave me all sorts of interpretations.
     
  11. Geekyebony

    Geekyebony Active Member

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    hahaha :D
     
  12. The Y-man

    The Y-man Moderator Staff Member

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    "Off The Plan"

    The Y-man
     

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