“Conditional” or “Unconditional” loan approval – What is the difference? Why is unconditional loan approval so important? What are the legal ramifications if you enter into a contract and you’re not able to obtain finance?
Conditional loan approval or pre-approval is when your lender conducts an assessment without doing a formal valuation of the property you want to buy. Per-approvals can be withdrawn by your lender at any time prior to an unconditional approval being granted. It is only once the lender has completed their valuation of the property will they issue you with an unconditional loan approval and ideally you want the approval in writing.
The risk of exchanging contracts before you get an unconditional loan approval is that (subject to a cooling off period) you will be bound by the contract of sale. If you are not able to organise funds to purchase the property, you could lose your deposit and find yourself before a court for damages suffered by the vendor.
Buying off the plan can also pose its own problems as it can be very difficult to get finance approval before the property is even built. We recommend you obtain a pre-approval before you sign any contract – this will give you an indication of the likelihood of being granted finance. Once your conveyancer is advised that the plan has been lodged for registration you will be able to inform your lender to start the formal process of obtaining unconditional approval. Registration of a new property plan usually takes anywhere between 4 to 8 weeks. This should be sufficient time for your lender to finalise its approval. But again don’t leave it to the last minute as there may be some unexpected delays that could impact your loan approval.
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