What happens if your mortgage pre-approval expires during lockdown?

Lockdowns and restrictions across Australia have been challenging for everyone involved, but for would-be buyers hoping to purchase property, it’s a strange space to navigate.

In Victoria, inspections and in-person auctions have been banned and can only be conducted remotely. In New South Wales it’s also tricky, with open homes and auctions banned in Greater Sydney, but private inspections permitted via appointment. Further, residents from Greater Sydney must obtain permits to inspect property in regional NSW, but this is limited to owner-occupiers only, with investment property inspections also banned.

Even in states with limited COVID-19 outbreaks, like Queensland, some restrictions still remain. Depending on your location, you may find that auctions and inspections are allowed but limited by density quotients like the one person per two or four square metre rule.

Potential buyers may be limited in where you can go and how frequently you can inspect or bid for property. And as time and the recent lockdowns drag on, you may have found that your mortgage pre-approval is close to expiring, or has expired.

So, what happens if your pre-approval expires before you can find your ideal property? Let’s explore what you need to know about home loan pre-approval in the time of COVID-19.

Why home loan pre-approval expires

Conditional pre-approval for a home loan may be beneficial for a number of reasons, including that it helps you to know exactly how much you may be approved to borrow, and therefore how much you can spend on a property. By knowing your budget, you may also have more power at an auction to potentially outbid the other hopeful buyers.

Most home loan lenders will offer pre-approval for 60-90 days, but after this set period your conditional pre-approval will expire. This can be frustrating, particularly if forces out of your control have hindered your home buying journey, but it is for your benefit, as well as the lenders.

A lot can happen in the property market over a few months, and you may find that the value of property you’re looking to purchase has shifted significantly. In this case, it may be in your best interest to re-apply for a different loan size.

If your personal situation changes, a lender may reassess your pre-approval regardless of the timeframe it has given you. This may be particularly common during a pandemic. For example, if you were to lose your job or find your hours reduced, this will significantly impact your income, and therefore your ability to service a home loan. It is in your best interest that you do not take on debt that you cannot afford to repay, so your pre-approval will be assessed again.

Conversely, you may find that your personal and financial situation has improved during your pre-approval period and you may be able to apply for a greater loan amount. Perhaps you’ve made a career change, gotten married or improved your credit score. All of these factors will need to be taken into consideration.

Further, if the Reserve Bank of Australia changes the cash rate, your income and borrowing power may need to be re-tested at a different interest rate. And if the cash rate has recently decreased, this may also work to your advantage as you may find you’re approved to borrow more funds.

How do I re-apply for mortgage pre-approval?

If you’ve been trying to purchase property in a restricted or lockdown-affected suburb and your pre-approval has expired, you will simply need to re-apply.

Visiting a branch for home loan pre-approval may not be possible for a lot of Australians right now. This is where online applications come in handy. One positive outcome from COVID-19 has been the digitisation of mortgage and paperwork.

There are a range of tools available that may help to automate the home loan application process, so you are able to re-apply for pre-approval from your home. This includes document scanning apps for bank statements, digital signature providers as well as identity verification tools for your devices.

Reduce Home Loans offers online pre-approval for eligible home loan borrowers, including first home buyers, next home buyers investors, refinancers and renovators. With a range of competitive cashback deals and interest rates on offer – some of which begin with a “1” – if your home loan pre-approval is set to expire, it may be worth speaking to a Reduce Home Loan specialist today.

1300 733 823