Lenders should be required to provide off-the-plan apartment purchasers with a funding pre-approval that will last them until settlement, a leading online property agency has argued.
iBuyNew CEO Mark Mendel said if banks are prepared to fund a development for construction then they should take the same stance on providing finance when it comes to the buyers of those apartments.
“The banks should be offering to fund the buyers of those apartments under the same policy that exists when the construction started,” Mendel said.
“Buyers of off-the-plan apartments should be able to go to the bank that funds the construction and take out a pre-approval that will last them until settlement.
“This reduces a part of the risk for the buyer as they don’t have finance risk. It also reduces problems for the developer as they don’t have settlement risk and overall it’s a win/win situation for the bank.”
Mendel, whose company focuses on off the plan apartment and townhouse sale, said settlement risk for off-the-plan properties is something buyers, developers and lenders need to guard against.
He said there was an onus on banks in the current highly competitive lending landscape to better protect their home loan customers.
“Consumers typically will not have the knowledge or expertise to predict what will occur in the economy going forward,” he said.
“Banks have research teams who will have a better idea of what will play out economically over the next 18 months.
“Some lenders are in a position to provide mortgage pre-approvals of up to 12 months, which would better protect customers purchasing off the plan.”