If you would like to buy a property or two, please raise your hand. If you love wading through red tape and bureaucracy, please raise your hand. If you enjoy spending ages on hold and doing endless administration and filling out forms, raise your hand. If uncertainty and putting your life on hold gives you a thrill, raise your hand. If you only did so right in the beginning and the other statements leave you feeling dizzy, this article is for you.
Why should you use a bond originator when you are trying to secure funding for your dream house? I spoke to Nicole Adams who is a subsidiary of Better Bond Home Loans to give you some answers to the questions you may have and some you did not even know you had to ask.
But first, why does NFS refer their clients to preferred bond originators?
When you want to buy a house, whether it is your first or your twentieth, you may not be aware of the traps that you may unwittingly stumble into. Buying a house is not just something to live in or to rent out. It is first and foremost a huge investment. An expensive one.
It is often necessary for NFS to act as a watchdog to safeguard the interests of their clients. There are a lot of charlatans out there who can sell ice to an Eskimo. They may say everything right and can even be backed by institutions that have been around for a long time.
The sad reality is that anyone who works on a commission basis – whether you pay the commission, or the bank does – will want to sell you more of whatever they are selling to ensure that their commission is driven up.
Many bond originators also sell other products, such as life insurance policies. They may well do a good job of securing an advantageous home loan because, by definition, that is their job. However, they may oversell life insurance. They may convince you that you need far more than you truly need.
We cannot vet every estate agent or bond originator. What we can do is build relationships with some professionals who have proven that they are ethical. We have an agreement with them that, as they are our clients, the agents may not try to force you to buy extra products.
Buying a house is not only a huge investment. It is also an emotional affair. We all want our dream home. You may have certain criteria and then an extensive wish list. Can you afford this? When you tell us that you are ready to look at investing in property, we will send you to Nicole to do a pre-assessment. That way you know your budget and can be shielded from the heartache of falling in love with a house and realizing afterwards that you cannot afford it.
It needs to be made clear that we do not gain any financial reward from this arrangement and therefore there is no conflict of interest when we refer you to a preferred provider.
Who is Nicole Adams?
Nicole has been a bond originator for about 20 years. But she did not start out as one. She was a Personal Assistant for several years, so she knows how to be, well, of assistance. She understands the value of putting the needs of the client first. She knows that relationships are the most important thing, not only with clients but also with professionals in multiple fields. She knows when to speak with authority and when to refer people to others in her extensive network of experts.
Nicole gained her initial 8 years of experience as a bond originator at a single product service provider. What is that? It is a company that makes use of only one financial provider to secure home loan funding.
Better opportunities and better services
When Better Bond approached her, she was reluctant at first, because their way of working was different to where she was before. She had been successful and happy at her erstwhile employer. Yet, the fact that Better Bond works with multiple banks appealed to her. After all, she is good at building relationships, and this is what she relies on to provide the best services to her clients. It must be working, as she has been with Better Bond for 9 years and going strong.
The not-so-secret services of a bond originator
But what do bond originators do? They take the headache out of applying for a home loan. There is the paperwork to be filled in multiple times. Follow-ups need to be done. There are the intricacies of the different offerings from the different service providers and to top it all off, these change quite regularly. How do we regular humans make sense of it all? Where are we expected to find the time?
Jargon and numbers and how to evaluate these
Nicole says her mission is to secure you the home loan with the lowest interest rate to the highest value. The industry term for this is loan-to-value. In other words, she aims to secure you a loan of 100 to 105% (plus costs) and negotiate the lowest interest rate on your repayment.
Here is how she does it:
- She submits multiple submissions to the four main banks, and where appropriate to other financial institutions, such as private banks (Investec or Rand Merchant Bank), Sentinel, building societies or HIP (which services only government employees).
- She can understand all the T’s and C’s and can make sense of different service offerings in terms of the pros and cons of each. She will then take the best offer and negotiate with the competing institutions to secure the best deal.
Surely, you could do so, as well?
Her leverage lies, not only in the fact that she can speak with authority on the products but also because of the relationship of trust that she has built up over time. This is backed up by the agreements that are set with each bank on an annual basis.
Can she prove her results?
She says that she has been able to negotiate as much as a percentage point lower on the interest rate of some clients’ bonds. This does not sound like very much! I hear you say. However, it could be as much as R200 000 over the lifespan of your home loan.
How does she make her money?
You may be sceptical. How does she get paid? She says that many people believe that bond originators write their costs into their service. It is not so. The service agreements signed with the banks on an annual basis states the percentage of commission that will be paid out to the company. The individual bond originators are paid a percentage of that percentage.
This remuneration structure is disclosed to every client by the Better Bond CEO in a letter, upon registration of the bond. ‘The banks pay us because they get the home loan and that increase their market share. The relationship we’ve built up means they trust that we have done the credit checks and other preliminary work required’. She is not bound by a service agreement that favours one financial service provider over the other.
What does she look at when considering your application?
She calls it the tripod:
- Credibility – this refers to your credit record
- Affordability – based on your current financial situation, are you able to make the payments
- Security – this relates to the property itself as well as the area in which you are wanting to buy
What is Northwood’s opinion on buying property?
Property is an important asset class. By diversifying your investment portfolio beyond stocks and shares to include property, you are reducing the risk of putting all your eggs in one basket.