I wrote the bones of this post in 2013, but its even more relevant now with stories of banks reneging on loan approvals just as the unit settlement date approaches.
Basically: Bank loan approvals mean very little if anything especially when buying apartments/housing off the plans.
You may think you can go and make your offer in safety. You really can’t.
All bank loan approvals are “indicative”…ie they merely indicate what the bank “might” be prepared to lend under their present policies AS AT THAT MOMENT. They all have language which lets the bank pull back from the loan if their policies or circumstances change and relieve it from any responsibility at all.
It leaves the purchaser in a dreadful position, facing possible bankruptcy, and unlikely to have any recourse against the Bank concerned.
Anyone who doubts this can talk to the hundreds of people that bought apartments off the plans in 2006-7, only to find that when the apartments were completed, their bank reneged on the loan approval, changing (for example) from 80% of purchase price to 65% of the then current valuation (which had of course dropped substantially due to the global financial crisis)….assuming they were willing to lend anything at all. Many of those people were unable to settle and were sued by the vendor (more often the receivers put in by the vendor’s bank). Some are now bankrupt.
Banks are not your friend. They are not loyal. They will not make a loan they now deem to be a danger, and will not be concerned at the consequences to you. They will not take a risk on your behalf and, to be fair, neither they should. But what they should do is be more up front that their indicative loan approvals are not worth the paper they get printed on. Buyers beware….especially buyers that are entering into long term sale and purchase agreements, where it is difficult if not impossible to forsee the bank’s lending criteria when settlement comes due.
You need some idea of what you can do if the bank won’t lend as much as you thought they would…whether bridging finance, or family support, or other property you can use as security. Having no plan risks disaster.