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Banks vs originator: How do you choose

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Aspiring homeowners have the choice to apply for a home loan through a traditional bank or a bond originator.

 The major difference is that an originator is a middle-man between multiple banks and the customer, says FNB’s Buyisile Maseko.

“If a customer approaches the bank directly, the admin falls on the customer to approach multiple banks if he or she wants to shop around.”

Both options have pros and cons. A bond originator works to obtain a bond on behalf of the home loan applicant by compiling and collating the documentation and submitting it to various banks and negotiating the best deal, which includes the lowest possible interest rate, size of the deposit required, and the bond term in years, says Carl Coetzee, chief executive of BetterBond.

“The ‘best deal’ is one of the most important reasons to consider using a bond originator as an interest rate difference can make a significant difference over the long term. In fact, 0.5% of a home loan of R1million could save a buyer around R80 000 over a 20- year bond term.”

Bond originators are paid a once-off fee by banks for brokering deals with clients. There are also no hidden costs. The fees paid to the attorneys and transfer duty paid to SARS are the same, irrespective of whether buyers use an originator or apply directly.

Although originators can’t guarantee successful bond finance, Coetzee says BetterBond’s current bond approval rate is around 77% (90% if you pre-qualify with the originator), which is “significantly higher” than the 35% approval rate for those who go it on their own.

“Similarly, we can’t guarantee the interest rate you will get, as this depends on your credit profile, financial position, risk profile and whether you have funds to pay a deposit. We will source the best interest rate possible and offer you comparative quotes from multiple banks.

The pros and the cons

Bank pros

  • You may already have a built-up track record, which could benefit you in your overall pricing/rate on your home loan.
  • The banker or branch consultant is able to assist you through the process.
  • Additional value propositions or discounts could be passed to you. 

Bank cons

  • You lose the option of multiple quotes, unless you shop around directly with other banks. 

Originator pros

  • You receive multiple quotes and can take the option which best suits your needs.
  • The mortgage originator could assist in compiling the paperwork on your behalf.
  • You need to submit only one set of documents while still applying at multiple banks.
  • Consultants can tailor an individual application that has the best chance of being approved.

Originator cons

  • You may miss out on additional benefits as the MO needs to be paid commission from the ban.
Pre-qualification

At BetterBond, pre-qualification is the first step: we work out the size of the bond you qualify for, says Carl Coetzee. 
A pre-qualification certificate can
be issued within 24 hours (during the working week) after receiving documents including: 
  • your ID document.
  • proof of address.
  • signed consent form.
  • three months’ payslips and three months’ bank statements (six months if you earn commission).
“These certificates are typically valid for three months, assuming your financial position remains the same.”
A key benefit of pre-qualification is that it demonstrates to sellers that you are a serious buyer as you have already gone through the process of assessing how much you qualify for.

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