When you have your bond approved, there is a feeling of euphoria. You can now have the funds to move into your dream house. However, Shaun Rademeyer, CEO of BetterLife Home Loans, cautions against unnecessary spending after your bond is approved.
It is all too easy to be complacent and spendthrift after bond funds reach your account. You might want that new lounge suite, or the latest appliances to go with your new home. But Rademeyer advises taking a step back and holding off on these purchases. This is particularly true when buying a home off-plan. There can be a long wait between the home loan application and the loan being formally granted and becoming active. During this time you need to be wary of the financial choices that you make.
Rademeyer offered four tips to help home buyers avoid bad financial choices that could impact on their bond.
- Make smart purchasing decisions:
People want their homes to look good, but new furniture isn’t always a good idea. “For example, it is natural to want to move into your new home with new curtains, furniture and appliances, but the latest smart-fridge might not be the best choice at this stage because you need to think twice before taking on any more debt to finance your purchases,” suggested Rademeyer.
Increasing your debt levels while waiting for a bond to become active could lead to the bank reconsidering the terms of your home loan agreement, according to Rademeyer. Any additional debt will have an impact on your credit score. If the change is too dramatic, a bank may even decide to withdraw the bond approval altogether if it thinks that you can no longer afford the repayments.
- Hold off on job changes:
You might be looking for that dream job, but Rademeyer pointed out that during the waiting period of a bond approval and the bond becoming active, it is best to put off changing jobs.
“Career changes can also have an effect on a loan approval, even if they are not negative. You may be offered a better job or a position with bigger bonuses, but lenders are generally looking for stability in your earnings and employment, and will need to be notified if you decide to make a change while waiting for your new home to be completed,” revealed Rademeyer.
- Communication is important:
“Loan approval can come completely undone as a result of reckless spending or sudden changes that affect the homebuyer’s financial profile. This could lead to serious problems with the home builder and damage the buyer’s credit record for many years,” stated Rademeyer.
When it comes to building a good relationship with your home loans provider, good communication is vital. It is also best, according to Rademeyer, that a home buyer change as little as possible between the time a loan is approved and when the house (if buying off-plan) when it comes to their spending. “Steady employment and spending habits will pay off when the full financial implications of being a homeowner become known.”
- Have access to your paperwork:
In the excitement of moving it is easy to pack everything in boxes ready to take to your new house. However, you shouldn’t rush when it comes to your paperwork, as there may be documents you need during the moving process. “You may well need all those bank statements, tax returns and payslips again when your new home is finished and the time comes to finalise your home loan and book the moving van,” said Rademeyer.
After applying for a home loan, it is important that you keep an eye on your finances, and don’t make any big changes to your spending habits or lifestyle. Taking on a home loan is a big responsibility, and the added burden of additional debt is something that should be avoided wherever possible.