Browse Forums Home Finance 1 Jan 28, 2016 10:26 am Is it possible to get full loan approval prior to a block of land actually being registered (in my case, approx 5 months prior to actual registration)? So something like get full approval now, transfer of funds occurs at registration, loan payments commence after registration? Re: Loan approval prior to land registration 2Jan 28, 2016 4:11 pm Great question ss2211. In most scenarios the answer would be 'no' as the lender would not have sufficient information to register a mortgage nor determine other key aspects of the transaction. If you had another property that could act as collateral for the proposed loan, 'yes,' you could get formal approval for an amount equivalent to what you need for this purchase and you would simply draw down on the approved facility when required. Hope this helps. Naritas Finance w: https://www.naritas.com.au l: https://www.facebook.com/naritasfinance t: https://www.twitter.com/naritas Re: Loan approval prior to land registration 4Jan 28, 2016 7:31 pm It depends on the lender and their policy. A big sticking point is the valuation as before any formal approval lenders need to make sure that this is acceptable, and the fact most are only valid for 3 months. For example one of big 4 will allow a valuation to be conducted if its within 3 months of expected title registration and as long as infrastructure such as roads and sewerage is in place. They will then issue a approval subject to registration of title (as long as you met all the other savings, income, etc requirements). So it is possible, just need to find out which lender will do it and how long beforehand they can offer it. Cheers Tom Re: Loan approval prior to land registration 5Jan 28, 2016 8:19 pm I've pretty much just done this with preapproval for land due to title in March, no problems. My pre approval has timed out, so just this week I've sent updated payslips etc to the mortgage broker so I can reapply, who has said the whole thing is no big deal and it happens fairly frequently. Re: Loan approval prior to land registration 6Jan 29, 2016 7:26 am Ours is approved on both land and construction we are waiting on our block to register and we haven't signed our building contract just got our formal tender. So yes you can. We are with the greater building society. They just do a valuation on both based on site plans and subdivision plans...and full working drawings of your house. Re: Loan approval prior to land registration 7Jan 29, 2016 8:59 am To clarify, there is a difference between pre-approval, conditional approval and final approval which I think some of the posts here are confusing. Pre-approval and conditional could be issued. Typically they would be issued subject to an acceptable current valuation, i.e. no more than 3 months old *and* notification of registration of title Final approval, which for most lenders means that loan documents would be issued, are nearly never issued so far away from settlement and in our experience are not issued prior to registration. Lastly, the missing information that lenders require is: 1. A current value of the property to determine LVR. Which depending on the land release may be impossible to determine (as another poster had correctly referenced) especially if none of the infrastructure is complete or site access is difficult. Furthermore, the definition of 'current' for most cheap end of the spectrum lenders will require the valuation to be 3 months old or less. 2. The risk factors from the valuation to determine whether the land is subject to any high risk grades which may make it unacceptable as collateral and invalidate any prior approval. 3. The confirmation from council that the details the vendor has supplied in the COS have been certified at council and confirmation from lands titles that the relevant mortgage/encumbrance can be registered against the title ahead of any other claims. Hope this helps. Naritas Finance w: https://www.naritas.com.au l: https://www.facebook.com/naritasfinance t: https://www.twitter.com/naritas Re: Loan approval prior to land registration 9Jan 29, 2016 3:45 pm I suspect we are talking different scenarios between what some people have experienced and what the OP is describing. With 5 months to completion and assuming a LVR between 60 and 95% (which is fairly standard) the general rule of thumb is that lenders are not comfortable with issuing loan documents so far out from settlement. Factors that can change this position include: 1. The lender, there are limited exceptions to this general rule of thumb vis a vis without knowing the specifics of the scenario it is best to assume a fairly standard credit policy from a major lender that is relatively easy to qualify for approval with. Furthermore, lenders that operate niche policy are not typically the cheapest lenders in the market. They can be at times, but again, we're not talking about the common experience for the majority of borrowers - and when the pricing is cheap and the policy is very generous, the credit criteria is normally quite difficult for the average borrower to meet. 2. If the time period is less than 3 months to settlement, because the valuation will be current at the time of settlement. 3. The LVR is extremely low and the borrower has a strong credit profile (which may likely include other real estate) i.e. the general characteristics of the lend put it in an extremely low risk category and the lender may exercise a policy discretion. Hope this helps. Naritas Finance w: https://www.naritas.com.au l: https://www.facebook.com/naritasfinance t: https://www.twitter.com/naritas Re: Loan approval prior to land registration 10Jan 29, 2016 4:42 pm Yeah we would be classed as no 3 in your scenario naritas..sort of. We went direct to the lender so no broker in the middle (don't like them) and have an off the shelf loan product with a great interest rate and plenty of benefits...we won't need mortgage insurance etc and have straight forward finances. We will have to redo the loan in a few months if settlement is further delayed but all they'll require is updated payslips (already did this once) so far. They've sent our approval Letter to our builder outlining the details of our contract and their terms etc and to our developer of the block..the front page of contract for the block was all they required...from what our loan manager and conveyancer told us it's pretty standard when buying land off the plan. I don't know the OPs financial stand point as it wasn't mentioned but certainly might complicate things if LVR is higher I guess... The biggest challenge will be if you take out a loan and then run out of money - you'll have an incomplete security and lenders do not like this so you can get stuck.… 2 19114 1 2992 Hi Minho I have heaps of experience in Ku-ring-gai with both DAs and CDC ( this is the main area we build in). DA's are taking 12-18months and CDC's we have been doing… 1 3166 |