Over 60% of the home loan applications today are submitted to the banks through a bond originator. Nevertheless, a surprising number of applicants have still not heard about this service or are harbouring misconceptions about this which deter them from going this route.
This was said last week by Mike van Alphen, National Manager of Rawson Finance, which, with a year-on-year growth of 35%, is one of the fastest growing bond origination enterprises in South Africa today.
“The most common misconception”, said van Alphen, “is that the service will cost the client extra. This, of course, is not the case. We, as bond originators, are remunerated by the banks, or whichever institution advances the loan."
“Another misconception is that we may have links with one of the financial institutions which will cause us to slant our advice in their favour. This too is wholly false: all South African bond originators are 100% independent and most deal with up to six banks as well as other institutions.”
“It is, says van Alphen, illogical not to deal with a bond originator and in 80% of the cases those who go the DIY route in submitting the loan application end up getting a deal that is not the best available."
“It is essential that every avenue be explored and investigated because the institutions do offer varying terms. What is more, the average applicant does need advice on these. All too often, the applicant going at it alone simply does not have the time or expertise to investigate every possible option and ends up settling for a deal that is probably second best.”
A recent case in which his staff were involved, said van Alphen, illustrates just how competitive (and to some, confusing) the financial institutions can be.
“The applicant had visited his own bank and had his application rejected, not because he was lacking in financial resources but because he had not submitted the application in the best possible manner. When we did our homework and drew up a new application we were able to present him with three different approved loan offers:
· a 90% loan at prime minus 0.5%;
· a 95% loan at prime; and
· a 100% loan at prime plus one percent.”
“Although relatively unsophisticated in financial matters, (but highly intelligent in other spheres), the applicant then needed advice on how each loan would play out, i.e. how much each one would be costing him each month.”
The advantage of dealing with an experienced bond originator, added van Alphen, is, as indicated, that we still structure the application so as to maximise its chances of success. Bond originators will also know all the banks’ products and how their criteria vary — which they do all the time.
In addition, said van Alphen, the bond originator will ensure that the applicant’s loan is realistic, i.e. not too over optimistic or pessimistic in relation to their earnings and prospects.
“The whole pre-qualification process, if handled by a professional with experience in these matters, will be of enormous benefit to the applicant”, said van Alphen.
