Depending on the bank and the purpose of your lending (i.e. owner occupied or investment property), pre-approvals for finance can have different expiry timelines.
Most pre-approvals expire after 60-90 days and that can go by fast.
This is where you really need to be proactive with your house hunting once you get your pre-approval in place. You’re not always going to purchase the first property you see, so it can be a very time consuming process.
For this reason, banks will usually allow your pre-approval to be extended by a further 60-90 days depending on the bank and whether or not you have had any major changes to your financial situation that would call for a new assessment.
This process can be repeated up to 6 months when your pre-approval then completely expires requiring another full application which will be based on updated lending criteria. However, it's important to note that the bank reserves the right at each extension to request updated information such as payslips and bank statements.
Something to be aware of when it comes time to renew your pre-approval is that the bank's policies and lending criteria may have changed since you last applied.
This is why it's important to check in with your Mortgage Adviser if you haven't managed to find a suitable property and it's getting close to your approval expiry date.
Things such as the banks stress test rates could have changed which means your borrowing amount could be affected, or certain banks may have turned off the tap for issuing pre-approvals as they may be approaching their limit for low deposit lending.
Another thing to note about pre-approvals is that they are a “conditional” approval.
It doesn't necessarily guarantee that you will get the loan or the property you are wanting to buy, so it's important to understand that there are two parts to a pre-approval.
That's why you will find a pre-approval is always “conditional” in most cases, upon the bank approving the second part, which is the security property on offer.
It’s this part that needs special attention, especially if you are a low deposit borrower and the bank requires a registered valuation (RV). You need to make sure to leave enough time for the RV to be done, so make sure you discuss this with your Mortgage Adviser when planning to make an offer on a property.
Are Banks Still Offering Pre-Approvals?
In most cases, yes.
However, if you have a low deposit (less than 20%) then the banks can be very picky when it comes to pre-approvals due to the Loan-to-Value (LVR) speed limit restrictions they must adhere to.
This restricts banks on how much low deposit lending they can do, so if they are nearing the limit sometimes they will stop giving out pre-approvals for a period of time.
The reason for this is once a pre- approval is given, they must hold those funds for the term of the pre-approval in case you end up purchasing a property and need to utilise the funds.
If they are nearing their limit for low deposit borrowers they may start to put on the brakes and only offer pre-approvals to existing customers, stop giving them out altogether, or request a signed sale and purchase agreement before they will assess your application.
One of the benefits of working with a Mortgage Adviser is that we can manage your pre-approval for you every step of the way, prompting you well before your pre-approval expires and helping you renew the finance offer. So reach out if you are looking to buy a property, and we can find the best lender to suit your situation!