Don’t spend too much while you wait for your new home
Be financially frugal if you’re buying a new home off-plan. This is according to Shaun Rademeyer, CEO of mortgage originator, BetterLife Home Loans, who says the long wait between the time the buyer’s home loan application is approved and the time when the loan is formally granted and becomes active can pose a real risk for the unwary.
“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 – and you should really think twice before taking on any more debt to finance your purchases,” he says, noting that a chunk out of your savings or a dramatic climb in credit or store card debt during the waiting period can seriously affect your credit score. “It could cause your bank to rethink the terms of your home loan, or even withdraw approval altogether if it believes you will no longer be able to afford the repayments.
“Our advice is that borrowers should in fact avoid taking on new credit of any kind at this stage, and especially put off buying anything like a new car or a luxury lounge suite.”
While waiting it’s also better for borrowers to avoid or delay changing jobs, Rademeyer says. “Career changes can also have an effect on loan approval, even if they are not negative,” he says. “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.
“The safest course is for the homebuyer to change as little as possible between the time a loan is approved and the completion of the new home. Steady employment and spending habits will pay off when the full financial implications of being a homeowner become known.”