So what is a pre-approved bond when it’s at home in front of the fire warming itself? One web definition says that a “pre approved bond gives both the buyer and seller the assurance that the buyer can afford offers made within a certain price brand, and that they will qualify for the bond required to make the offer.” So let’s unpack that some more.
How It Works
When you use a bond calculator it’s reassuring to know what to compare figures to, what to feel comfortable about investing into the selling price field. Getting yourself a pre-approved bond is the very first thing you should do before you put in an Offer to Purchase.
The National Credit Act stipulates that monthly deductions, like monthly living expenses, income tax and debt need to be considered. It is recommended that you provide your bank or home finance professional with a precise summary of your monthly expenditure and your level of debt so your pre-approved figure can be established. Your bank or home finance professional will formulate your pre-approval figure and issue you with a certificate. This enables you to provide an estate agent with a pre-approval certificate that has been calculated according to the National Credit Act requirements.
The pre-approval is valid for 90 days after which your bank or home finance professional should contact you to check whether your expenses have changed over this period. (It’s better not to wait to be contacted but rather contact them a few days in advance.) If there has been a quantifiable change, the pre- approval will be revalidated and recalculated. If there is no quantifiable change to either income or expenditure, your bank or home finance professional will reissue a revalidated certificate. This ensures that your input data for the bond calculator is always accurate.
After the banks have assessed your home loan application, and if the application is successful, the bank will issue a Quotation which will include interest rate, cost of credit, any special conditions that may apply, etc. Your bank or home finance professional will discuss this and other bank quotations with you. Once you settle on a Quotation, your bank or home finance professional will proceed to instruct the attorney appointed to register the mortgage bond.
Advantages of having a pre-approved bond
It can be so frustrating for a seller to accept an offer only to find out weeks down the line that the deal has fallen through due to the buyers inability to get a home loan. It can also be very disappointing for the buyer. With a preapproved bond this can be avoided. Using a bond calculator you can determine what you aspire your preapproved bond to be.
Bear in mind when dealing with sellers and Estate agents that they want to sell to you! You are holding the cards when it comes to buying and you will seek out the very best deal available to you. This attitude will make the seller think twice before counter offering and will have the Estate agent working twice as hard to close the sale.
One should be encouraged to be assertive when making an offer, apply for bond pre-approval before you go out on a show day.
The posture of the Estate agents, like anyone who is dependent on financial institutions giving credit to customers in order for them to earn an income, is very different towards a pre-approved buyer, especially one who has clearly gone to the trouble of doing the necessary homework with a bond calculator.
The agent knows that you are looking for a home and that you essentially have the money available. This is a huge bonus for the agent who will go out of his way to help you spend your money.
The other thing the agent will be very aware of is that you don’t have to spend your money with him/her but there will be other agents out there trying to help you spend it. The result is that once you have made an offer he will do everything in his power to get the seller to accept your offer.
Currently we are living in a buyers market with some areas selling homes for as much as 30% below their asking price. Both the agent and the seller know this, the pressure is on the seller to accept what he knows is an approved buyer when you walk in..
Good luck with pursuing your preapproved bond