Glossary · Australian property
Pre-approval.
Lender's preliminary indication that they would lend you up to a specific amount, subject to satisfactory property valuation and final-stage checks. Typically valid for 90 days. Can be applied for before you've found a property.
Mechanic: lender takes your income, expense, credit, and asset documents, runs full serviceability test, and issues a written 'pre-approval' / 'conditional approval' letter. The pre-approval names a maximum loan amount and the conditions still outstanding (property-specific valuation, formal credit and employment verification at settlement, etc).
What pre-approval gives you: confidence to bid at auction (auctions don't have finance-clause cooling-off), credibility to the seller's agent who can verify your finance is in place, full visibility into your borrowing ceiling. Some sellers list properties as 'pre-approval required' to filter out speculative bidders.
What it doesn't give you: a guaranteed loan. The lender can still decline at the formal-approval stage if property valuation comes in below contract price, employment status changes, or APRA serviceability buffer rules tighten. Pre-approval typically expires after 90 days. A small minority of lenders offer 6-month pre-approvals.
Pre-approval vs formal approval: pre-approval is conditional. Formal approval is unconditional and the loan is committed. Most contracts written 'subject to finance' allow 14-21 days from contract for formal approval. Don't confuse pre-approval with contract finance. The contract clause requires formal approval, not pre-approval.
Source
ASIC RG 209 (responsible lending); APRA APG 223 (serviceability); ABA Banking Code of Practice.
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