HOW REPEAT BUYERS CAN FINANCE THEIR NEW HOME
Most repeat buyers rely on the equity from the sale of their first home to finance their new home. However, the process of cancelling one home loan to take out another is not always simple. It is therefore advisable to arrange a consultation with a bond originator to help you better understand how to go about the process.
While experienced real estate professionals will be able to outline the general processes and procedures to follow, a bond originator will have the specialist expertise to know what each of the various banks require for these transactions. Consulting with a representative of both professions will help you navigate the various complexities involved in transactions that involve more than one home loan.
Below are some of the most commonly asked questions around this process:
When do I start paying for the new loan?
You will need to continue the repayments on your existing bond until it is cancelled and the property is transferred to the name of the new buyer. Similarly, when you buy a new home, you will not be required to start making bond repayments on that property until it is registered in your name.
How do I avoid paying two bonds at once?
Repeat buyers usually add a suspensive clause to their Offer To Purchase (OTP) on the new home that makes the offer subject to the sale of their existing property and the simultaneous transfer of the two properties. Generally, there is a time limit on the sale of the existing property and once this happens, the transferring attorneys will then co-ordinate the registration of the transfers.
How does the bank calculate my affordability on the second home loan?
The above mentioned suspensive clause is critical when the bank assesses the repeat buyer for the affordability to purchase a new property. To qualify for the bond on the new home, you will need to go through the entire application process again and provide all the required supporting documentation. When filling in the application, note the intention to sell the property already registered in your name, as this can determine the success or failure of the application. When reviewing the bond application, the banks will look at the track record of payments on the existing bond and take the outstanding balance owed into account when deciding on an interest rate as well as the loan amount they will offer for the purchase of a new property.
How do I improve my chances of qualifying for more on my home finance?
When the time comes to apply for another home loan, partial or skipped payments will count against you. On the other hand, adding a little extra to your monthly instalment from time to time will count in your favour when it comes to negotiating an interest rate on a new home loan.
Who can I contact for help?
If you are unsure of what processes need to be followed and what you can afford, your first step should be to book a consultation with BetterBond who will advise you free of charge, and can assist you in obtaining prequalification for a home loan so that you know what your buying power is. Thereafter, arrange another free consultation with your nearest RE/MAX office for more insight into what sorts of homes are available in your price range, as well as what price your home will fetch within the current market.
*Advice sourced from Mary Lindemann, Chief Operations Officer of BetterBond, SA’s leading bond originator.