Congratulations, you’re approved! What’s next?
The conditions of the loan offer are usually detailed in the offer letter itself, and can sometimes seem quite confusing, meanwhile you’re just concerned about how to access your money!
In the current market it definitely feels like borrowers are made to jump through more hoops than perhaps 12-18 months ago. This is largely related to the tighter credit market, and Responsible Lending Code.
Conditions, generally speaking, will usually fall broadly under two categories:
- Documentation supporting/evidencing what is in the statement of position/application form
- Documentation verifying your proposed purpose for the finance
The former, previously banks were quite loose in the requirement for certain things up front, and were happy to provision for many things after approval stage. It seems in the current space that banks require significantly more up front, which overall will end up streamlining the back-end of the deal and mean less conditions on your approval letter.
The latter has become particularly important in our tighter credit market, as we see equity releases by way of revolving credit without specific purpose almost become a thing of the past in many cases without appropriate supporting documentation. For example, if a borrower applies for a car loan or a home improvement loan, a lender may be more likely to approve those loans because of their specific purpose, rather than a signature loan that could be used for anything. In many cases, where it wasn’t required previously – quotes, invoices, Sale & Purchase Agreements etc. are all now required in the above scenarios.
Finally, the structure of the loan, such as its interest rate, the repayment type, and loan size (and loan size relative to security value), can influence the lender's inclination to approve the deal and finance the borrower.
Ideally, the best offer is an unconditional one, which is always the most desirable before you go unconditional on a property.
It’s worth checking with an expert who understands all different banks collateral criteria, to see if there may be a more suitable lender for you. Contact me today for a chat.
Read all about the other C's in this 5 part series:
Part 1 - Character
Part 2 - Capacity
Part 3 - Capital
Part 4 - Collateral
Part 5 - Conditions