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Benefits of Using a Bond Originator

Benefits of Bond Origination

In the USA, the UK and Australia, amongst others, bond origination has been around for many years with bond originators responsible for sourcing the majority of the approved home loan products in their respective countries every year.

South Africa was a little slower on the uptake. Bond origination came to our shores roughly nine years ago for the first time, when the 1999 to 2005 property boom was still in its baby shoes. The concept took a while to find consumer buy-in, but once it did, the growth was enormous. To give you an idea: In 2007 around 60% of all new home loans were secured through mortgage originators.

The achievement of a 60% market share in such a relatively short space of time can only be viewed as indicative of strong consumer confidence. Looking at some of the benefits associated with using mortgage originators will give you an idea why so many buyers opt for the services supplied by mortgage originators instead of going directly to the banks.

#1 Convenience

In the days before bond originators, you would have had to go through the cumbersome process of physically visiting and applying for bonds at each and every bank – during office hours, naturally. When you use a bond originator, they are normally prepared to meet you at your premises – even after hours - and you only need to go through the application process once, irrespective of the number of banks and other lenders that will be approached.

#2 Coverage

Many bond originators have agreements with all four the major banks, some of the smaller banks, the private banks and other non-bank lenders. The significance of this is that should you crack the nod from more than one institution, you could choose the one that offers the best rates and the best terms.

#3 Better Rates

Your bond originator will negotiate with the banks and non-bank lenders to secure the best possible interest rates on your behalf. The rate concessions achieved by originators are normally between 0.5% and 2.5% below the prevailing bond rate. According to estimates, the bond origination industry collectively saves consumers around R 5bn per year in rate concessions.

#4 Quicker Turnaround Times

Even with all the additional red tape caused by the NCA, bond originators still manage to take an application through the approval process in half the time it would take if you had to approach a bank or lender directly.

#5 Competitive Insurance Premiums

The NCA (National Credit Act) put a stop to banks compelling customers to use their (often expensive) insurance products. Your bond originator will obtain quotes from various insurance companies and help you to choose the plan most appropriate to your set of circumstances. Although it is too early to report on the exact figures, it is projected that home owners could collectively end up saving a massive R600 million in insurance premiums each year.

#6 It Costs You Nothing

The best part is that making use of a bond originator won’t cost you a cent. The bond originator’s raising fee is paid by the bank, the costs of which are never passed on to you, the client.

To conclude

It is no small wonder that the banks are somewhat less than enthusiastic about the bond origination industry. After all, they have to sacrifice margin (and frequently insurance income too) whenever a bond originator secures a bond on a client’s behalf.

Be that as it may. Consumer demand for bond origination is growing and, from what we have seen, it is clear that the bond originator is here to stay.

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