I signed an offer to purchase with the condition that I need to get a 100% loan approved. I applied at several banks and one approved the loan for 100%, however the loan has a very high interest rate. At this interest rate I will not be able to afford to make the monthly payments on the bond. What are my options now regarding cancelling my offer? Am I obligated to accept the offer even though I cant afford it and will default on the first payment? If I go to my bank and explain to them that I wont be able to afford it and they withdraw their quote will the contract then be null and void?

Hi there and thank you for your question,

I think that you might have a little bit of a problem, because a bank has granted you a 100% bond... Have you told the agent about that yet? Or the seller? Have you told anyone?

If you have not told anyone, then you must speak to the bank and explain that they did not do their afordability test properly because you simply won't be able to pay the monthly instalments, and that if they give you the loan it would amount to reckless credit lending, and that they must therefore withdraw their bond approval.

If you have told somebody, I think that you might still need to do the above in order to have the bond approval withdrawn.

Did the bank do the afordability test properly? Did they ask you to declare your income and your expenses? Or did they just approve you?

If you "can't" get a bond within the time period stipulated in the offer to purchase (it's normally 10 to 20 days) then the offer to purchase will automatically lapse and be null and void. The suspensive condition (the bond) was put in their to protect you - to give you an "escape" if you can't get a bond.

You must use it.

Speak to your bank before you speak to the seller or the agent. Don't tell them too much about the whole thing. Rather just say that you can't get approval. 

Perhaps even say to them that they might want to start re-marketing the property so that they don't lose any other sale?

If there is a part of the answer which you need more advice on, or clarity please continue in this same thread instead of opening a new question.

Att. Patrick

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