Possibility of the bank withdrawing a formal approval

Discussion in 'Loans & Mortgage Brokers' started by abexx, 14th Mar, 2017.

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  1. abexx

    abexx Member

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    Hi all,

    Just wanted to check if you know any examples where banks cancel the loan after it has formally approved.

    I have googled a bit but all examples I can find are actually conditional approvals being withdrawn (e.g. due to valuation issues etc.) so I thought I might just ask. I also know if there are changes of circumstances (e.g. salary drops by 50%), banks could do so but I am not envisaging any such changes.

    The background to this query is that I have obtained a formal approval, with the only condition being to obtain a building replacement insurance. I thought that is a done deal. However my parents then become super concerned that the bank might just back away, in particular because currently all my income is overseas income and there seems to be general trend of banks turning away from people like me (which also means if the current bank cancels the loan it would be difficult to find an alternative). The question my parents have is eg "what if the bank says 'sorry our policy for foreign income has changed so we cannot lend you money'".

    I have asked the mortgage broker who said no way the bank can cancel the approval now and would also check with my solicitor but wanted to hear some live examples if there are any. Many thanks all.

    Cheers
     
  2. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    What do you mean by formal approval.If you tell them something not true its enough to walk away but if your approval is clean there is no issue to an approved loan. I have rarely seen an unconditional approval of some type...what condition? It may be something you influence such as income, insurance or a lie. Banks dont approve anything until the day its settled in reality. If they find something wrong they will renige. That said they also dont tell customers they will no longer lend just for fun either
     
    Last edited: 14th Mar, 2017
  3. Corey Batt

    Corey Batt Well-Known Member

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    Fairly rare - the only cases I know of this happening for purchases post approval is when they've done spot checks on the applicants employment to ensure nothing has changed etc.
     
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  4. abexx

    abexx Member

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    Many thanks for this. Sorry I was not very clear. I was intending to differentiate between (formal/unconditional) approval and pre-approvals.

    In that sense the approval is still conditional if I understood you correctly - subject to (1) no change to my circumstances; (2) obtaining a building replacement insurance. However, the information I provided is true and I am not expecting any real change so I guess that should be fine.

    Thanks again.
     
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  5. abexx

    abexx Member

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    All right that makes sense. Thanks.
     
  6. Tom Simpson

    Tom Simpson Well-Known Member

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    Normally when banks change their policy it will be as of a specific date, any deals submitted prior to the cut off have the previous policy applied.
     
  7. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    I've been in the game for nearly a decade - and have written a few loans......never have I seen a formal approval revoked (touch wood!)

    Cheers

    Jamie
     
  8. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    It is possible for a bank to withdraw a formal approval, but it tends to occur when they find the borrower wasn't entirely honest with them.

    I'm not aware of a lender ever backing out on the basis of a policy change. It's been threatened, but it hasn't actually occurred.
     
  9. abexx

    abexx Member

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    Many thanks for all the helpful advice above. Very grateful.
     
  10. Ethan Timor

    Ethan Timor Well-Known Member

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    The approval may have an expiration date, though. Usually 3 months but could be quicker.