How to buy a home – be upfront with your bank
How much do you really know about the home buying process? Sure, house hunting is fun and playing with online calculators does give you an idea of how much house you can afford. But what should you know before you even sign an offer to purchase?
3 Contracts and banks
Although most purchasers prefer to register their primary residence in their personal capacity for, among other things, capital gains tax purposes, it might be advisable to obtain proper advice regarding the benefits of other entities such as trusts. Proper estate planning is essential, especially when you are purchasing a second or additional property.
Provision of the purchase price
The purchase price can come from one of the following sources:
- Sale of current property;
Make sure that the agreement clearly specifies what the source of the funds are. It is imperative that the agreement also stipulates the timeframes within which the funds are to be delivered.
To protect yourself, the offer to purchase can be made subject to suspensive conditions. Please note that the deed of sale will not be legal and binding if the suspensive conditions are not fulfilled timeously and to the letter. Any deviation from the terms of a suspensive condition has to be addressed in an addendum before the due date of such a condition.
If you need to obtain funds from a financial institution you will probably have to make your offer subject to the approval of such a bond.
Depending on your financial situation, the approval of the bond should not take longer than a month. There may be circumstances that require a longer period for bond approval and you must communicate these to the seller via the estate agent.
It is advisable to contact your bank beforehand to find out the amount for which you qualify. You can also make use of a bond originator in order to speed up the process.
In general, banks are not in favour of a transaction where the transfer costs and the bond registration costs are included in the purchase price and form part of the loan amount.
In some cases certain banks may allow this (for example, for first-time buyers). The purchaser should, however, make certain that the bank is informed about the cost component that has been added to the loan amount. The bond originator and/or personal banker will be able to advise the purchaser properly on the bank’s products.
Do not sign an addendum in which it is stipulated that the seller or agent will pay the transfer fees, or that the selling price will be reduced, in order to mislead the bank. This is fraud!
Next time: The bank’s responsibilities towards you; guarantees; and your right to your own bond registration attorney