Surprise! Imagine being 10 days away from settlement and after a 3 month bank approval process, your bank says the “D” word – Declined!
Last week we witnessed another backflip decision from a lender, changing their minds after the client had received a “Conditional Approval”. The lender declined the application due to their income requirements changing, and the client is now exposed and not able to settle on time.
With credit policies continuously tightening, we strongly advise to hold out for an unconditional approval before committing to a purchase.
Types of Bank Approvals:
• Pre-Approval – An indication that the bank may approve, based on income information. Indicative only and it gives you an idea of what is possible.
• Conditional Approval – An assessment of all the facts and figures, and conditional to a valuation and final risk assessment.
• Unconditional Approval – a lender has looked at income, valuations, and all aspects of the loan application, and now fully commits to producing loan documents and providing funds for your purchase.
We find real estate agents are increasingly placing pressure on buyers to hurry their decision and exchange contracts. To allow for bank delays, we suggest negotiating a 3 to 4 week “finance clause“ to allow for Unconditional Approval and full lender commitment before you are legally liable to settle.
To find out more about finance clauses and avoid lender surprises, email us or call 02 9449 2333 to talk to one of our property specialists.
At Plan Assist, we do more than just Home Loans, we make property investors!
Plan Assist help families just like yours find their dream home or obtain their next property investment, even if they have no experience in searching or finding that great bargain.
Our acquisition team, mortgage advisory team and project management team are ready to act on the favourable buyer’s market conditions right now in Sydney.
To find out more about securing your next property purchase, visit our website or call 02 9449 2333 to talk to one of our property specialists.
Short Answer: If it’s a suitable strategy for you, within the next 3 months.
Long Answer:
Historically sticking with the variable rate triumphs over fixing interest rates, just like picking a falling or rising stock on the stock market. You can never pick the exact timing of the market.
Fixing now or in 3 months won’t make too much difference. However, leave it for 12 months and you may lose an opportunity to purchase insurance at a good rate. Most commentators are predicting the fixed rates next year should be in the 7%pa or higher due to more optimism about the future. If it’s the right thing for you, where you have longer term debt or investments, then in the next 3 months may be your best opportunity.
Be Careful – Real Life Examples:
a) Client sold home, Paid out home loan and paid $16,000 break cost in August 2008
$450,000 Home Loan, 5 years fixed at 7.45%pa, 3 years remaining
b) Client was quoted in March 2009: $62,000 break cost
$500,000 Home Loan, 5 years fixed at 7.8%pa, 4.2 years remaining
It’s important to look at your individual situation and assess whether fixed rate loans are a suitable rate-hedge strategy. Basically, if you don’t change property and home loans from year to year, or you have long term investments & loans, it may be the best time to consider changing to a fixed rate loan.
To find out more about fixing your interest rate, call our Plan Assist Mortgage Team on 02 9449 2333.
As we mentioned previously, we are most likely entering the low point of interest rates right now.
Westpac yesterday advised us that they are increasing their fixed rates by 0.3%pa effective tomorrow, and most other lenders have indicated this will be the trend for fixed rates in the coming months.
Variable rates are most likely to be stable or drop slightly this year, however looking forwards, its about the bottom of cycle.
If you think fixing is the right thing for you, then now is the time to implement that strategy.
To find out more about whether or not its suitable for you, contact us or call the Plan Assist Mortgage Team on 02 9449 2333.