When is a preapproval not a preapproval?
Even before Winston Peters made his announcement that he would form a coalition government with Labour, we were seeing some disturbing trends in the banking sector. You need to be aware of these if you are looking to buy a home or investment property.
There have been a number of cases where bank customers have been granted preapprovals, only to have their finance declined at the last minute. This can have serious ramifications, especially when a contract is unconditional (as is the case when buying via auction). The purchaser is liable for penalty interest if they can’t settle, and of course the vendor will be out of pocket (which may have ongoing negative consequences if they were planning to use the money to settle on another property purchase).
The excuse the banks have been using is that the value of the properties is lower than the purchase price, and with the market softening they are protecting their position. On top of this, we have now had a change of government and no one really knows how this will affect the property and finance markets. So, we expect caution to reign supreme. What should you do if you are a property investor or planning to buy a home?
Make sure you deal with a good mortgage broker, as they will be able to assist you. Contact us for a recommendation if you need one.
If you are looking at a particular property, double-check with the bank that they are OK with it before you make an offer or bid at an auction.
We also encourage you to watch the video recording of the Economic and Property Update Post-Election Special
webinar with Matthew Gilligan and Tony Alexander. They discussed the election result and how this will likely impact the economy and the property market.