Cape Town - Consumers should think twice before taking on any more debt after just having a home loan approved, cautions Shaun Rademeyer, CEO of mortgage originator BetterLife Home Loans.
He warns that the sense of relief and excitement once a home loan has been approved can easily lead to some unwise financial choices, especially among first-time buyers.
In his view, 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 later.
“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," says Rademeyer.
“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.”
He explains that, buying a new home off-plan, for instance, 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. This can pose a real risk for the unwary.
During the waiting period, it’s also better for borrowers to avoid or delay changing jobs, in his view.
“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.
"A loan approval can come completely undone as a result of reckless spending or sudden changes that affect the homebuyer’s financial profile, and this could lead to serious problems with the home builder and damage the buyer’s credit record for many years.”
Another tip from Rademeyer, is not to be too hasty when packing up your existing home as you may well need your bank statements, tax returns and payslips again when your new home is finished and the time comes to finalise your home loan.