Bond originators have become powerful players in the property-buying process and can offer aspiring homeowners a number of advantages.
Those who make use of a originator when applying for a home loan are rewarded with convenience, potentially lower interest rates and a better chance of having a home loan approved. Shaun Rademeyer, chief executive of MultiNET Home Loans, says almost half the mortgage applicants who were declined by one bank, and subsequently used a bond originator, were granted a loan by another bank.
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This is a result of the intervention of a mortgage originator submitting applications to multiple banks simultaneously. “By submitting multiple applications on behalf of the buyer, mortgage originators stimulate competition between banks, resulting in the buyer receiving more favourable financing terms.
“And home buyers do not pay for this service, so there are no costs against which to balance the benefits,” he says. Originators provide a convenient one-stop service to all potential buyers, says Kevin Mountjoy, director of Bond Gallery.
“Mortgage originators are specialists in home loans. We understand the banks’ varying lending policies and originators are in a position to present the loan to all banks to secure the best result for the buyer.”
He says multiple bank submissions from mortgage originators give buyers a better chance of securing a home loan than if they approached their own bank directly. “Mortgage originators have excellent relationships with the banks and can address any queries directly with the banks at the appropriate level.”
Before approaching an originator Mandy Waddington, head of marketing at ooba Group, says buyers preparing to apply through an originator should visit the company’s website to calculate what they can afford.
“The bond calculator will not only tell you how much you can pay, but also provide you with a rough estimate of your monthly instalments, based on an interest rate of prime.”
A buyer can then be prequalified Kay Geldenhuys, the group’s head of sales fulfilment, says it has two different prequalification products available, one of which allows a customer to check their credit score, and asses what they can afford, thereby ensuring they are shopping within their means.
The other offers a “qualified buyer’s certificate”. “A home loan application coupled with a qualified buyer’s certificate will enjoy a 92% chance of approval.” She notes, however, that every customer should check their credit score before considering buying a home.
Once you know your credit score, you are able to address any issues that might compromise your home loan application. “You need a minimum credit score of 600-plus to be eligible for a home loan from any of the major lenders in South Africa.”
Most bond originators offer the services of bond calculators and assistance with pre-qualification. Have the right documentation ready When applying for a home loan, documentation will differ based on whether the buyer is self-employed or employed full time, says Rademeyer.
However, in both cases, an applicant will need:
• The offer to purchase.
• An identity document.
• Three months’ payslips.
• A detailed income and expenditure statement.
He adds: “In terms of the buyer’s state of affairs, they should always ensure that they have a healthy credit score in the pursuit of buying property.” Carl Coetzee, chief executive of BetterBond, says self-employed individuals require more comprehensive documents and so should approach a bond originator for assistance.
“The documents needed will vary from person to person.” How the process works, from start to finish Once a buyer has signed an offer to purchase on a property, Rademeyer says the buyer – or the estate agent – will provide the mortgage originator with relevant information pertaining to their financing needs, together with the supporting documents.
“The mortgage originator compiles the application and submits it to multiple banks on behalf of the buyer. Based on the individual bank’s feedback, the mortgage originator will negotiate the best home loan deal and interest rate.
“Once feedback is received from the banks relating to the approval and the interest rate attached to the bond, the originator supplies this information to the buyer, who can then choose the preferred financing option.” He says the process from submission to grant takes, on average, about seven days, assuming all the required documentation is received.
“In some cases, a decision can take just 24 hours.” Coetzee notes that the banks are able to respond “rather quickly”, depending on their volume of applications.
“However, we generally tell clients it can take anything from an hour to three days to receive all the bank offers. Each bank has its own timelines as to when they are able to revert and this has been affected by lockdown.”
Benefits of using an originator Bond originators are an intermediary between the buyer and the bank and submit one application to multiple banks to secure the best possible interest rate for a borrower. The more banks applied to, the more favourable the interest rate is likely to be.
Coetzee says: “On average, BetterBond achieves a 0.6% difference in interest rate between the highest and lowest offers from the banks and, in some instances, much more. “This means, for example, that a client who would qualify for a prime interest rate of 7% on a R1 million bond could receive a further reduction of 0.6% just by getting their bond through BetterBond. This amounts to a saving of almost R400 on monthly bond repayments and, over 20 years, close to R87000.”
Similarly, research by ooba shows that home buyers who obtain only one quote for finance could repay their home loan at an interest rate that is 1% higher than if they had used a home loan comparison service.
Geldenhuys says: “A 1% difference in interest rate could translate into a saving of almost R850 a month, or R10 000 a year, on your monthly repayments.”
He adds that 42% of people who are declined by one bank are approved by another bank using ooba Home Loans’s origination services. “The risk of applying to only one bank is simply too high these days as each bank has a different appetite for lending, and as a result, their lending scorecard might be tighter than others.”