Buying property is a big financial commitment, which is why savings of any kind is welcomed. Applying for a home loan through a bond originator is one of the lesser-known ways to save money.
WORDS: MARANA BRAND – IMAGES: SHUTTERSTOCK
You have that dream home in mind and are ready to take the next big step to get onto the property ladder – securing a bond.
Your assumption may be that because you’re a long-standing customer of your bank, you will get preferential treatment and will get a good rate by only applying to your own bank. But how do you know you’ve got the best offer if you don’t cast the net a bit wider to compare?
This is where a home loan comparison service like a bond originator can come to your rescue. They can apply to multiple banks on your behalf to secure you the best deal – and their services are free.
What do bond originators do?
“Sourcing comparative bond quotes is the smartest way to ensure you get the best deal on a bond, meaning the most favourable interest rate based on your personal credit profile,” says Carl Coetzee, CEO of bond originator BetterBond.
“A bond originator sources quotes from multiple banks by applying for a bond on behalf of the home loan applicant with the purpose of securing the lowest possible interest rate,” he explains.
Even if your bank ends up offering you the best deal, you give yourself peace of mind knowing that you have in fact got the best deal on your home loan, says Rhys Dyer, CEO, Ooba. “And if allowing the banks to compete for your home loan saves you a few percentage points off your rate, or provides you with more favourable terms, even better!”
The average interest rate offered by banks has increased by 0.15% year-on-year for the second quarter. The cost of funding for banks has increased and this increase is being passed on to homebuyers, he says.
This means banks are offering fewer home loans at below the prime lending rate than before, and therefore it’s even more important to use a home loan comparison service to secure the best interest rates in the market.
More banks are better
“Our latest statistics show that homebuyers who only obtain a single quotation for finance would have an interest rate that is 1.01% higher than if they had used a service like ooba to obtain comparable quotations from all major lenders,” Dyer says.
Not only do different bond quotes help secure the most favourable interest rate but the data indicates that the more banks you apply to, the more favourable the interest rate is likely to be, says Coetzee.
“What’s more, the applicant applying on his/her own directly to a bank tends to apply only to one bank which puts the odds of getting a bond at all or nothing. A bond originator, on the other hand, will always apply to multiple banks, which significantly increases the chance of bond approval.
“In fact, BetterBond’s own stats show that the average approval rate when applying to one bank is 53%, but this number goes up to an impressive 79% when applying to four banks,” he says.
How can they help me?
According to Dyer, there are four top reasons for using a home loan comparison service:
1 Saving you money
A difference of as little as 0.25% on a R1m loan over 20 years could save you nearly R40,000.
2 Saving you time
A bond originator will save you tremendous amounts of time in preparation and submission of the required paperwork by submitting a single application to all the banks on your behalf. They will also do all the legwork to negotiate the best deal for you.
“Bond origination consultants also know exactly what the various banks require from applicants, and what their different home loan products offer, so they can tailor the application to ensure that it has the very best chance of being approved,” Coetzee adds.
3 Saving effort
Dealing with one home loan comparison service is a whole lot easier than liaising with up to nine banks. An originator will be able to explain all the terms and conditions of the offers that come back to you.
4 No cost to you
Because the banks pay the bond originator for their home loan leads, it doesn’t cost you anything. You get the best home loan deal, with great service. This doesn’t affect the value of the bond or the interest rate offered.
“Interestingly, too, financial institutions understand that home loan applications that come via a bond originator are also being submitted to their competitors, which often makes them more open to offering the client the best possible rate for fear of losing the business to another bank,” says Coetzee.