What is “loan rejection letter” and how does it affect you?
When a condition is set with booking fee, the parties to the sale of a property will only proceed to signing of Sale and Purchase Agreement (SPA) when this condition is fulfilled. This condition is loan facility must be approved. The application for credit facility from a financial institution (bank) will support the eventual payment of consideration in the SPA.
However, not everyone is fit and ‘qualified’ to obtain credit facility from a bank. Some whose commitment is too high, and bank rejects the application. This letter is the “loan rejection letter”. How does it affect you?
As a purchaser, this letter will be used to tell the vendor or developer that the condition set with booking fee is not met. Hence, the booking fee should be refunded back to the purchaser. However, there is a practice that the rejection letter being issued, the bank would not consider application for credit facility for another 3 months. During this period, the purchaser cannot apply any further credit facility.
This is being reasonable to the purchaser that loan application is a serious matter, and unless genuine, the bank is not entertaining those who do not intend to purchase property. Many can book the property and later resale in the market during boom time.