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You can save money on your home loan by using a bond originator

08 Jul 2019

Too many home buyers are still missing out on the possibility of getting a better home loan deal by applying through a bond originator.

Too many home buyers are still missing out on the possibility of getting a better home loan deal by applying through a bond originator. Read on...

This is according to Rudi Botha, CEO of national bond originator BetterBond, who says there really needs to be more awareness about what bond originators do to help borrowers find the ideal home loan for their needs by acting as an intermediary between them and the banks.

“In addition, home buyers need to know that they have a 75% chance of their loan application being approved if they apply through us, compared to a less than 50% chance in the open market,” he says.

“Of course we’re not saying that buyers will necessarily get a bad deal by going directly to their banks, but then they’ll never know if it’s the very best deal they could have gotten, especially when it comes to the interest rate. This is especially true at the moment when the banks are competing so strongly for new home loan business, and it’s important because a better rate can make a really significant difference to the cumulative cost of a property over the lifetime of a home loan.”

Botha says bond originators make use of a process which involves submitting each loan application to several banks simultaneously - including the home buyer’s own bank if they wish - and this provides the opportunity for buyers to go ‘comparative shopping’ for their loan without any of the hassle of going from bank to bank themselves.

Also read: Applying for a home loan? Good reasons to use a bond originator

“We submit one application which then attracts several responses or ‘offers’ to the prospective borrower from the competing banks, and because they all have different credit criteria and scoring systems, these offers can vary considerably, especially when it comes to the interest rate,” he says.

“Currently, the average variation between the best and worst interest rates being offered on the applications that we submit is 0.5%, which may not seem like much of a difference, but on a 20-year home loan of R1.5 million, it translates into a potential saving of more than R120 000 in interest, plus a total of about R6 000 a year off the monthly bond instalments. And there is no cost to the buyer for using our service to achieve such savings.”

Calculate how much a lower interest rate can save you here.

There are also many other factors that can vary, says Botha, such as the income required to qualify for the size of loan the home buyer requires, or the size of deposit that may be required before a bank will offer a preferential interest rate. “And what reputable originators do is to assist buyers to understand all these requirements and then to negotiate and select the best overall home loan deal to suit their personal financial circumstances.”

Also read: Pay 0.5% less on your home loan interest rate, see what you'll save 

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