OTP Adelaide pre approval

Discussion in 'The Buying & Selling Process' started by Kaz76, 25th Jul, 2019.

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  1. Kaz76

    Kaz76 New Member

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    hi, I’ve bought an OTP townhouse in south Australia and got pre approval from bank SA subject to valuation. Build hasn't started yet but Bank SA did a valuation which came to 10% less than what I paid. Does this sound about right and to ask a silly question will they revalue once it’s built as part of approving the home loan? Also curious if anyone has had this happen and had any probs getting loan approved, currently I have 20% to contribute but if they keep it valued at 10% less will only have 15% (ie will need LMI). Build is due to start end of this month and complete in 9 months approx.
     
    Kaz76, 25th Jul, 2019
    #1
  2. The Y-man

    The Y-man Moderator Staff Member

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    Not sure what sort of valuation they did, but the one that counts is when it is completed.
    However, if that is some estimation based on similar builds nearby, it may not be good news for you.

    There have been people whose val has come in more than 10% under what they paid in recent times. This is one of the risks of OTP, but you sound like you have some contingency measure so good on you. You got 9 months to build up the savings for LMI (or to avoid LMI).

    Also remember you will need money for any items not included in the build.

    The Y-man
     
    The Y-man, 25th Jul, 2019
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  3. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    We generally don’t bother with pre-approvals for OTP purchases as most take months/years to settle - so most pre-approvals lapse.

    As mentioned above - it’s the valuation once it’s completed that’s important. That’s the val the lender will lend against.

    Cheers

    Jamie
     
    Jamie Moore, 25th Jul, 2019
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  4. D.T.

    D.T. Specialist Property Manager Business Member

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    Make sure you save up a buffer fund by time settlement comes too just in case it values less then as well. Its not too uncommon for OTP properties.

    Is it for you to live in or to rent out?
     
    D.T., 25th Jul, 2019
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  5. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    Pre-approvals are only valid for 3 - 6 months depending on the lender so they're not particularly useful for an OTP purchase.

    Valuations can also be tricky with this type of purchase due to the time frame involved. Valuations for properties being purchased are rarely a problem, but of the few that are, OTP properties are one of the common property types.

    Purchasing off the plan is risky. To mitigate the risks:
    * Speak with a broker before signing the contract. You can't get a pre-approval, but you can at least get a reasonable assessment that you'll qualify for the finance, or direction about what you need to do to qualify when the time comes.
    * Have a decent sized deposit. At least 20% plus purchase costs, but ideally 30% or more.
     
    Peter_Tersteeg, 25th Jul, 2019
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  6. Kaz76

    Kaz76 New Member

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    To live in long term
     
    Kaz76, 25th Jul, 2019
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  7. Kaz76

    Kaz76 New Member

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    Thanks, I have a mortgage broker and he seemed to think if it stays valued at that I’m okay if I’m comfortable with some level of LMI
    If it completes when they say it will I’ll have 27%
     
    Kaz76, 25th Jul, 2019
    #7
    Peter_Tersteeg likes this.