Homeloans - Bond Originators
What exactly is a bond originator and where does the role of the bond originator start and end in the home buying process? Haydn James of Bond Icon explains...
Well firstly, a bond originator is simply a person and/or organisation which sources a bond with a participating financial institution for, or on behalf of a person looking to finance the purchase of their new home. Bond originators work closely with estate agents, who pay the agencies a referral commission for all bond applications received by the agencies or they sell directly to public. There are also bond aggregators, who do exactly the same thing but are licensed to work through the major bond originators.
The bond originator, on receipt of an offer to purchase from the estate agent (who sold the property to the buyer), will complete the necessary homeloan application, and gather required supporting documentation from the home buyer. This is then submitted to the banks of the home buyer's choice, or to all participating institutions. The bond originator - well the good ones anyway will then proceed to push the banks for successful approval of the required finance and for the best interest rate possible for the client. The bond originator then reverts back to the client with the institutions' final answers and allow the customer the opportunity to choose which institution they would like to proceed with.
Sounds simple doesn't it? So where's the catch you're probably asking? Well it's not that simple. Bond originators are often expected to perform miracles at times where customers earnings (or combined earnings if it is a joint bond application) don't qualify them for the loan they want; or even worse, their credit records cause their bank managers to have sleepless nights. Let's be honest, the last thing you want is a cranky bank manager! What most people (consumers and estate agents alike) fail to understand, is that the bond originator does not make the final decisions regarding the bond grant amount and the final interest rate granted to a home buyer. Those decisions are made by the institutions granting the loan, which are based on strict credit scoring criteria.
So what are the benefits of using a bond originator?
As a consumer shopping around for a homeloan, you can approach the banks directly. However, this can be a time consuming and often a painful exercise, especially if you have to do it multiple times at multiple institutions. This is where you benefit from using a bond originator.
- All the necessary paperwork is managed for you - you just need to submit your proof of earnings and bank statements to the originator.
- Applications to multiple banks can be made instantaneously, saving you time and the inconvenience of having to do it yourself.
- Also, the bond originator has relationships with most, if not all the institutions, which means that you as the consumer have a greater choice. What's more, if a competing institution offers you an interest rate better than your own bank, the originator can persuade your bank to match the competitor's offer.
- Follow-ups with banks are done by the originator on your behalf, saving you time and money on lengthy phone calls.
- Using a bond originator costs you nothing. You should not be charged by an originator for supplying you this service.
- As the customer, you always have the choice. You decide where the application should go to, and after reviewing the final bond grants from the banks, you decide which one you want to use.
- Whether you go directly to your bank, or you use an originator, you don't pay a cent. The banks pay the originator a commission for referring the deal to them.
Some originators also provide financial services such as short term and life insurance, or are affiliated to a brokerage or institution that provides such services. Customers are often advised by the banks, financial planners etc, to ensure that their liabilities are protected in some way in case something ever happens to them and that they don't lose their house. Similarly they may require insurance over their household goods, but don't know really where to start so originators essentially are becoming a valuable source of finance and finance protection.
At the end of the day, all originators provide essentially the same service. Their existence is dependent on ensuring that you, the customer, get the best deal to meet your requirements. If you are unhappy with the final offer granted by the bank, you can instruct your originator to try and improve your deal. It won't always be granted but you can still try - even if it is a couple of months after registration and you are living comfortably in your new home.
Here are some additional pointers that you should be aware of.
- Make sure your financial affairs are in order, you do not have poor payment records, you do not have any judgements or credit bureau listings against you. Poor credit and financial records count against you!
- Ensure you can prove where your source of earnings come from, that they are deposited into a financial institution which you can prove by presenting statements.
- Ensure your originator submits to as many banks as possible. This enables you to shop around for the best possible deal.
- Be prepared to negotiate with the banks. In most cases they would be willing to match a competitors rate if they knew the business is potentially coming their way. Let the originator use their contacts and resources at the institutions to do this.
Buying a new home can be a seriously stressful event. You have so much to worry about, the last thing you really want to be doing is running around trying to organise finance. There are people out there whose sole purpose is to alleviate this stress from your schedule. You just need to sit back, relax, and let the bond originator do it all for you.
Bruce Jones of Homegrow advises that all the major financial institutions follow very similar vetting processes to determine the amount of money they are prepared to authorise, and at what interest rate. The two major considerations, among others, are:
- The loan to value ratio (the value of the money borrowed relative to the value of your home)
- The affordability of the individual to service the monthly bond repayment
A huge benefit of renovations where cost is concerned, is that there is no transfer of property and therefore no transfer costs. Bond registration costs average at 1% of the value of the registered amount.
A good idea would be to contact a reputable bond origination firm to partner you through the process of selecting your most financially astute solution, and then assist you with applying to multiple financial institutions.
Courtesy SA Complex News