QuoteReplyTopic: Unconditional loan approval reneged? Posted: 01/May/2012 at 11:20
The strata unit that i am looking to purchase has strata issues.
Does the bank check the strata report prior to offering an unconditional loan or can they offer an unconditional loan and then renege it if they discover stata issues at a later date?
The loan offer always comes with the proviso that final confirmation is required.
No financial institute is going to make a loan that they cannot recover by foreclosure, if the borrower goes bad. The security has to be valued at a higher amount than the amount of the loan. They need to confirm this.
I am NOT a lawyer. Anything said is NOT legal advice.
Please post your legal questions in a forum rather than sending a PM. Thanks.
So are you saying that an unconditional loan can be revoked by the bank?
Problem is, i dont want to exchange contracts with the vendor, and then find out that the bank will not provide the loan anymore (even though they have already provided unconditional approval)
I would take this question up with your conveyancer as they will conduct the searches into the strata management before you sign the contract. Your broker can advise you on the valuation process that your chosen lender will use and you then can decide the path you are going to take. Some lenders have policies that they just rely on the Contract of Sale without doing a physical inspection of the property and as such are unlikely to ever have strata "problems" brought to their attention. You still need to do you own due diligence to be comfortable.
Lenders do not get involved in investigating body corporate issues, that is up to you conveyancer or solicitor.
However lenders do have the right to pull out at any time if they discover something that they find out and is considered a risk to them.
If the lender has given you an unconditional approval then they are at this time satisfied with the security but depending on the serverity of the strata issue they could change their mind.
Best go to the lender and discuss with them to get their view. If they dont have a probelm get it in writing and then go back to the vendor and re-negotiate your position.
Just want to talk about my experience, I purchased a studio as an investment before. The bank broker told me confidently, I could get 80% LTV. And then I went on with the purchasing just after signing up the contract and skipping the cooling period (the reason was they were offering me a good price, so I took the risk), just 3 days before settlement, the bank broker told me the headquarters changed their mind, they can only get me 65% LTV. So I had to find other way to get the rest of money, at the end, I borrowed the money from someone, the bank only compensated my delay of settlement penalties. So the lesson I learned is always buy a low risk property.
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