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Factor rates rises in pre-qualification calculations

Understand your budget, with rate rises included, when you determine rate rises in pre-qualifications.

Pre-qualifications matter. Knowing your financial position before house hunting reduces possible embarrassment and disappointment down the line.

This is why homebuyers should seek out reputable financial institutions or bond origination companies such as HomeBid Financial Services and ooba to get accurate and unbiased assessments of their financial wellbeing.

Buyers will be requested to list all their sources of income and monthly expenses. Here it is crucial for buyers to be transparent when supplying this information to obtain an accurate pre-qualification amount and avoid any uncomfortable financial issues down the line. It is equally important to add in the additional expenses they will incur from the purchase of the new home – rates and taxes, levies, and maintenance.

From this information the financial institution will calculate an amount for which the buyer will pre-qualify. “With the possibility of interest rates increasing, it is suggested that when he calculates his monthly bond repayments he also calculates what the monthly repayments will increase by should interest rates rise by, for example, 0.5% , 1% and so forth,” explains Gary Sacks, GM of HomeBid Financial Services, who has over 10 years of private banking experience.

There are additional benefits to obtaining a pre-qualification prior to viewing a home, Sacks adds. A large number of property sales continue to fall though AFTER an offer has been signed on the home. This results in a significant waste of time for both parties and a missed opportunity for financially qualified buyers to make offers on the home. Armed with a pre-qualification letter from a financial institution or bond originator, the buyer can feel confident that the seller will be more receptive to negotiate on the purchase price knowing that the buyer is serious and that there won’t be time delays in obtaining bank finance and other reasons resulting in missed opportunities.

With ever-changing banking regulations and banks’ tighter lending criteria, Sacks suggests that when buyers apply for bond finance they use a professional service and one that has the experience to ensure the buyer obtains the best deal in the shortest period of time. “Self-employed applicants often have reservations about applying for bond finance,” he says. “With the right professional advice and guidance, the application process can be smooth sailing.”

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Alison Goldberg is the former property editor of Business Day (1985) and the Financial Mail (1991-99). In 1995 she won the Sanlam Financial Journalist of the Year Award. She has edited such titles as National Constructor and The Miner in Australia and has freelanced for The Star, The South African Jewish Report and The Jerusalem Post.

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