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Don’t spend too much while waiting for your new home

Buying a new home off-plan is a pretty common occurrence in today’s property market, but it can mean a long wait between the time that the buyer’s home loan application is approved, and the time when the loan is formally granted and becomes active – and this can pose a real risk for the unwary. Shaun Rademeyer, CEO of SA’s biggest mortgage originator, BetterLife Home Loans, says the sense of relief and excitement that comes with a home loan being approved can easily lead to some unwise financial choices, especially among first-time buyers.

Be smart with your purchasing decisions

“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”, advises Rademeyer.

He says 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, and could cause your bank to rethink the terms of your home loan. The bank may 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 should especially put off buying anything like a new car or a luxury lounge suite”, says Rademeyer.

Put off changing jobs

During the waiting period, it’s also better for borrowers if they can avoid or delay 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”, explains Rademeyer.

Communication is golden

Indeed, he says, communication is the key to building a good relationship between borrower and lender. “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”, continues Rademeyer.

“Therefore 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.”

Don’t rush to pack up

And finally, says Rademeyer, you shouldn’t be too hasty when packing up your existing home. “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.”

Over spending and a change in employment can affect the home loan approval process, so once you’ve applied, rather sit tight and wait to be given the go-ahead before you consider making any other large purchases.

couple with their new home key

Things to consider before buying a newly-built home

An increasing number of South African homebuyers are electing to buy newly-built properties rather than pre-owned homes, and there are in fact a number of very good reasons for doing so.

No transfer duty

For most buyers, the most important of these is the cash they save because there is no transfer duty payable on homes bought directly from a developer or builder. Instead, VAT is assumed to be included in the purchase price (provided that the developer is registered as a VAT vendor).

Lender pre-approval

Another big plus is that new developments by established building or development companies are often “pre-approved” by a lender, making it much easier for prospective buyers in these projects to obtain home loans.

High chance of customisation opportunity

In addition, residential developers often give buyers the opportunity to choose their own fittings and finishes, and sometimes even the chance to customise the layout of their new home and garden to suit their own needs. On top of that, new homes in South Africa come with certain structural guarantees and must comply with certain “green” design and building principles, making them more eco-friendly and energy-efficient. This all translates into less maintenance and long-term savings for their owners.

The other side of the coin

However, there are also quite a few potential pitfalls that those who are considering a newly-built home need to try and avoid if they want their home-buying experience to be as exciting and fulfilling as it should be. These include:

Deposit scams when buying “off-plan”

Anyone can print a fancy brochure full of floorplans and attractive pictures so you should never sign an offer to purchase a home that has yet to be built unless you have:

  • Seen the land on which it is due to be constructed
  • Established that the developer has a good reputation, is registered with the National Home Builders Registration Council
  • Seen that the property developer has a track record of successfully completed projects.

In addition, you must make sure that any deposit you are asked to pay is going into the trust account of an attorney or any estate agent so you will not lose your money if something goes wrong with the development or the building company.

Long-term developments

It can be exciting and financially rewarding to be one of the first owners in a new development, but you need to know that the project will be finished and fully-developed within a reasonable period. If there are 50 stands, for example, and only 20 homes have been built in the development in the past five years, that may be cause for concern. In this case, you should probably give it a second thought, unless the developer can prove to you that the other 30 stands have now been sold and that they will be completed within the next few months. If this isn’t on the cards, then you could find yourself living on a “building site” for several years and therefore unable to sell because the levy income from only a handful of owners would be insufficient to provide the type of security and the additional facilities that were originally promised – things that would make your home appealing to potential buyers.

Too many “extras” and upgrades

Check your plans and building contract very carefully before you sign for a newly-built home in order to determine exactly what building materials, equipment, fittings and finishes are included in the specifications (and what else may be regarded as “extra” for which you would have to pay an additional amount). Do not make the mistake of assuming that all the top-of-the-line finishes that you see in the developer’s show-home will automatically be included in your home, or take it for granted that the rooms in your home will be the same size. A whole lot of the features you like most may not actually be included in the basic contract and including them could put the home beyond your budget. In addition, if you do decide to opt for upgrades, you should not just accept a whole package. Consider each item to see if you really need it or could live without it, and make certain that everything you choose is individually specified in your building contract along with its price.

No completion or hand-over date

Your contract must contain a date by which your new home will be finished and ready for occupation. If it is not finished by the date stipulated, you will then be entitled to cancel the contract and get back all the money you have paid so far, including the deposit and any progress payments made to a builder. If your contract does not contain this clause, you could find yourself at the mercy of a builder who is taking far too long to finish the project while you are stuck making bond repayments on a home you cannot occupy.

No provision to rectify problems

Even newly-built homes can have faults, and whether it is a cracked tile or a major water leak, you should not have to live with it or pay to get it fixed before you’ve even unpacked. To prevent this from happening, you must make sure that your building contract states that you will have a certain number of days after taking occupation to draw up a “snag” list of defects for the developer or builder to fix before you finally sign the occupation certificate. You should also retain the right to call in an independent and professional home inspector to help you at this point, especially if this is your first home purchase.

Purchasing your own home is one of the most important investments you will ever make, so it’s in your interest to ensure that you’ve considered everything you need to before buying, especially if it’s a newly built home in which you’re interested.

Buying a home after getting divorced

Getting divorced is tough, and buying a new home afterwards may be just as hard, especially if you are still the co-owner of a property with your former spouse.

This is according to Shaun Rademeyer, CEO of BetterLife Home Loans, SA’s biggest mortgage originator, who says if you were previously part of a two-income household, and qualified for your last bond on that basis, it may be very difficult to qualify for a new home loan on your own, particularly if you are the one making child support payments.

“You will obviously not have the same discretionary income as before, so the banks will probably err on the side of caution when assessing whether you will also be able to manage a monthly bond repayment on your own place.”

As a result, he says you may need time to pay off some debt, raise your credit score and hopefully receive a salary increase.

He says in divorce cases it is also quite common for the husband to move out of the joint home and agree to his ex-wife and children continuing to live there for a few years while he pays the home loan instalments, especially if she has not been working full-time and does not have the means or the credit record to rent or buy a home on her own.

But in such instances he is essentially ‘lending’ his creditworthiness to his ex-wife, and may be foregoing his chance to buy another property for a long time, says Rademeyer.

“And at the very least in such cases, he should ensure that there is a proper agreement in place about how the proceeds will be divided when the house is eventually sold.”

Similarly, he says if you are the “spouse left in the house”, you may want to think twice about trying to buy your ex out and take on the whole mortgage. Even if you are working and can qualify to do so, it will most likely put you under financial strain, as you will also then have to carry all the insurance and maintenance costs on your own, he says.

“In short, you may be better off buying a new, less expensive property in your own name.”

However, all the experts agree that it is a bad idea to try to buy a new home while you are still going through a divorce, he says. For one thing, the stress and emotion of the situation could well lead to you making bad purchase decisions, and for another, lenders will most likely not want to approve any home loan application until the divorce settlement has been agreed.

“And if the joint property is to be sold as part of that settlement, both parties would really be better off renting until that sale has been finalised, if at all possible.”

One reason is that if you are meticulous about paying your rent on time, this will assist you to build up a new credit record as a single person and then, perhaps, to use your half of the sale proceeds as the deposit on a new place, he says.

“At that stage, however, your best course would be to consult a reputable bond originator and obtain pre-approval for a home loan before you go house hunting.”

He says this will give you confidence that you are looking at homes you can afford, and give a seller the confidence to accept your offer to purchase in the knowledge that you will be able to obtain the necessary finance to complete the transaction.

Credits Property24: http://www.property24.com/articles/buying-a-home-after-getting-divorced/22128

What late-blooming homeowners need to know

Although most people have learned a considerable amount by the time they reach their mid- to late-thirties, they may not know much at all about buying a house.

That’s because the age of first-time buyers is now much higher than it was a generation ago, and is still rising in many parts of the world thanks to high levels of student debt among people in their 20s, and a simultaneous trend towards later marriage and family creation.

In SA, for example, the latest statistics from BetterLife Home Loans show that the average age of first-time buyers is now 34. And what that means is that they often also have quite different needs – and financial concerns – from those their parents had when they were acquiring their first properties.

Good schools and short commutes, for example, are likely to be much more important, and not only because these often serve to underpin local home values.

Today’s first-time buyers know that an area with great public schools can save you from having to send your children to costly private schools – and what a difference this could make to their family finances in the future.

In addition, thirty-something buyers are more likely to be settled or settling into a career at a particular company and looking carefully at their commute times, especially if there are two income-earners who must travel in different directions to get to work.

And on top of that, such buyers are often not contemplating a second home purchase until after their children have grown up, so they have to be especially careful when making a choice between urban or suburban living. City living would most likely enable them to cut down on commuting and spend more time with their family, but would probably also mean a higher purchase price and less space and freedom for growing children.

On the other hand, while suburbia tends to offer great value these days as well as child-friendly gardens, living there may well mean having to spend much more time and money to get to work.

Next, buyers in their 30s have to manage their finances more closely, taking into account things like saving for their children’s tertiary education and their own retirement. They may have more established careers and earn more than the previous generation of first-time buyers, and they may well qualify for bigger home loans. But just because they can borrow more does not mean they should.

When calculating how much you may borrow, lenders don’t always include such financial necessities as retirement or university savings and future home improvements, and buyers in their thirties must be realistic about the additional financial responsibilities they will face as they age by not taking on a monthly payment that leaves them too little financial leeway.

And finally, the thirty-somethings must try to avoid draining their savings to cover a deposit and transaction costs such as transfer duty, bond registration and legal fees, which usually have to be paid in cash. Doing so leaves buyers vulnerable to major unexpected expenses or events like major surgery for a child, job loss, or sudden disability.

Indeed rather than put their savings at risk, they should find a lower-priced home and/ or one that will require less expenditure on upkeep.

Designer pieces for your home

Every dream home needs the perfect designer pieces to accompany it. We’ve compiled our favourite pieces from South African designers and fashionable retailers of designer furniture to give you some ideas to help you complete your home. From reception desks to outdoor loungers, you’re bound to see something you like.

Dream wonderful dreams as you sleep peacefully on this beautiful Oak Queen Pallet Bed. It is a stylish, simple and clean sleeping unit that retails from Weylandts for R5495. It would go well in an industrial, modern home surrounded by beige and white. The recycled pallet look is very fashionable currently, and the wheels make it easy to move (though hopefully they are sturdy, as you wouldn’t want to move around in your sleep!).

This Tuxedo Chair from Herman Miller is exquisitely detailed. It comes either with or without arms, and the price is available on request. It has a sort of retro 70’s feel to it, and could be a nice contrast to an ultra-modern home, or would fit right in with any retro designer home.

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Build the perfect library with your very own stunning Library book shelf from Coricraft. This walnut antique-style bookshelf would be a wonderful addition to any study or lounge. The ladder gives it that ‘old Victorian home’ feel, and it would be great as a shelving unit or book shelf. The book shelf retails at R19995 from Coricraft.

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Make your outdoor area somewhere special with this stunning Voyage Outdoor Daybed by Kenneth Cobonpue. The ‘lounger’ is for sale at Weylandts, and retails from R48,500. Its stylish frame would look great in any outdoor setting, and its comfortable mattress and soft cushioning are ideal for lounging around the pool on those long lazy summer days.

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This Lampung Reception Desk with Burgundy Inlay would make a wonderful addition to any home entrance. It is simple and elegant, with several fine details added to give it the perfect finish.

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