Home loan mortgage bond finance

Those planning to apply for a mortgage bond in order to buy or improve a home, quite often feel loyal towards their own bank - especially if their relationship has been harmonious and mutually satisfying over the years. This can result in their looking nowhere else for bond finance.  Rowan Alexander is the Director of a Cape Town northern suburbs estate agency, now spreading its wings to serve a wider territory.  He warns that it can be a serious mistake not to enquire what other banks may be able to offer. The best way to go about this is to appoint a mortgage originator\consultant to investigate the market and discover how three, four or more mortgage financiers will react to your application and financial position.

"The great advantage of such consultants," says Alexander, "is that they are specialists in this field and deal with a wide variety of banks. They understand the criteria on which applications (the so-called "score cards") are judged and how these vary from bank to bank, with the result that Bank A might well be more suited to a particular application than Bank B. We have, for example, seen cases where on an investment property, one bank will give a 100% bond whereas another will only cover 50%. Similarly, banks often have very different views onapplications from self-employed people, or those whose incomes are partly or wholly commission related.

"The experienced mortgage originator\consultant will know what reaction to expect from each bank, to every individual application - each of which will have different factors to be considered. Using this "inside" knowledge, the consultant will usually be able to get his client a deal, thatwill in most cases be considerably better than the one his own bank will offer him. The difference between one deal and another, particularly on interest rates, can be substantial. Currently a 1% reduction in the interest rate will save about R170 000 on every R1 million borrowed over the typical 20 year loan period." In some cases, says Alexander, the originator might even suggest that the client switches his entire account to another bank because in so doing, he will improve his loan conditions exponentially-but this is not usually called for.

It is very important he adds, that the applicant talks to the originator at the outset, not after he has tried on his own and possibly encountered problems or come close to signing a bad deal. It is equally important for the applicant to be totally open with the originator about his financial position right from the start. Unpaid debts, credit record blemishes or possible future claims on the applicant should be admitted as soon as the originator is appointed; if these come to light later, the applicant's credibility and honesty will be questioned, and his chances of getting a good deal will be diminished.

 Alexander reminds potential bond applicants that the services of the originator come free of charge to the applicant; his fees are paid in the form of commission by banks on every successful deal. Considering this, it "makes no sense at all to avoid using a good mortgage originator".

For further information, contact Rowan Alexander on 082 581 3116 or email: rowan@asproperty.co.za