More than half of all bonds in South Africa are processed by bond originators. Why has the traditional approach of going directly to the banks taken a back seat? Here are 3 good reasons that make going the bond originator route attractive to people in the market for a new home loan:
1. The Best Interest Rates
A bond originator will shop around and find the best deal for the buyer. This multiple-quote model enables bond originators to drive down interest rates offered to buyers, getting the buyer the best rate possible. Bond originators will tell you that because banks are aware that when an originator submits an application, other banks are competing for that business, they are more likely to sharpen their pencils and give you a better, more competitive deal.
Not all banks agree with this sentiment, though. Standard Bank maintains that their pricing is not determined by the channel, because each one is priced on individual merit. Bear in mind that, since your own bank understands your financial history, it can often put forward the best deal without the need for shopping around. And, as we all know, shopping around takes time and energy that most of us simply don’t have given our busy lifestyles. If you have a good relationship with a banker who delivers quality service, then going direct may be the best way forward.
2. The Convenience Factor
The thought that someone will help you avoid the inconvenience of interacting with the banks can be very attractive to a home buyer. Bond originators have both the experience and the knowledge to provide the buyer with a pain-free experience. Not only do you get multiple quotes, you also get this for free. Banks pay bond originators an undisclosed fee for the service they provide, although commission levels have reduced significantly since the early 2000’s.
3. Quick Success
Potential buyers who apply for a bond through an originator are more likely to be granted one than those who do not go this route and choose to go directly through banks. Almost half of the home loan applicants that are declined upfront by their bank, will be approved by another bank. It makes sense to try multiple banks simultaneously, and not wait around for rejection before trying the next bank on your list. Your bank can be overexposed in a particular area and not want to expose itself further, or it could simply have a different risk profile. Bond originators are adamant that because they are able to match customers with the bank that suits their profile, buyers who apply for a mortgage through an originator are much more likely to be successful than those who go directly through banks.