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Spreadsheet Ranger

Bond originator or not

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Posted (edited)

I am in the process of buying a property (a Flat) and everyone in the process seems to take a cut and I am struggling to navigate where these cuts are justified and where to steer clear.

 

Currently the agent told me to use their in house guy for the bond part instead of going through Ooba or Betterbond, I want to know if a bond originator is worth it and if I should instead go directly to the bank eliminating the fee working on the assumption the saving will be passed on to my rate maybe?

 

Then if one should use a bond originator, why would I use their in house guy over a more established company with more pull/leverage like betterbond or ooba?

 

@Bandit what did you do when you bought your place?

 

The agency I am working through is Urban Index, I have never heard of them, but I had really great service from the agent and so far it feels like he has my interest at heart, but it's the property game at the end of the day so just want to double check what the wisdom is around this as I am a first time home buyer so very prone to be suckered into stuff I suppose.

Edited by Spreadsheet Ranger

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I used Betterbond. But I bought from a developer and the estate agents made use of them. In other words - I don't remember paying for their services (not sure how they get paid).

 


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I think the bond originator gets paid by the bank so there should not be any costs to the seller, which is good - I just want to make sure that free service is not at my expense in terms of getting the best interest rate.

 

IE, would a bond originator really be able to negotiate better than me, I mean I can sit with the banker and tell him if you give me a better rate I will swing my bank account or car loan over to you as well -  I am assuming that is how negotiations with a bank works, and working on that assumption the question becomes; What leverage does the bond originator have over me going to the bank directly to ensure the best interest rate is given?

 

For anyone else more experience reading the above, I am clearly out of my depth here and might be thinking about this all wrong.

 

@Bandit what is your credit score and what percentage interest did you get?

 

How was the experience using betterbond, assuming I go with them - any tips?


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18 hours ago, Spreadsheet Ranger said:

@Bandit what is your credit score and what percentage interest did you get?

 

Uhm, no idea what my credit score was but it's good. Haven't checked in a long time but never missing a payment for over a decade does that.

 

This was for a 100% loan so interest rates weren't as competitive, but I opted to rather put the deposit into the access facility.

 

Told her I wanted FNB. So she went to ABSA, Standard Bank and Nedbank first. Nedbank responded with prime-0.15, ABSA with something like Prime+3 and Standard Bank somewhere in between. Then sent the Nedbank offer to FNB who immediately matched it. We didn't negotiate much further because of the 100% bond.

 

Since then and with the interest rates that fell I moved to Investec and in the process of moving my bond to them as well. A bit early, have to pay bond attorneys again (although, Investec discount) and I get Prime-0.65% which means I'm now on 6.6%. Also move my vehicle finance to them at Prime-0.5%. So very happy. In the grand scheme of things the extra round of bond fees is not the worst and I just want to get away from FNB as a whole. Not advisable unless you've done the calculations and happy with the financial impact (you shouldn't be.... something wrong with me)

 

Lessons:

  • If you want to negotiate, put down a 20% deposit
  • Make sure you're happy with whomever gives you the loan because moving too soon is not cost effective

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What issues do you currently have with FNB?

 

Thanks for the deposit lesson, I am tempted to just go for the 100% now with how the economy is, but putting up a deposit might be safer I suppose.

 

How exactly does a deposit work, in other words lets say I want to get a bond for R1 000 000 what difference does it make if I put down R200 000 as a deposit VS asking for a loan of R800 000 instead?


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On 5/29/2020 at 1:54 PM, Spreadsheet Ranger said:

What issues do you currently have with FNB?

 

Nothing with regards to their product offering. Biggest mistake I ever made though was "upgrade" to their Private Client suite which is a bunch of bs. Most of the time you have to phone the relevant department anyway.

 

Bigger deposit can potentially mean better interest rate. If we put the interest rate aside, there should be no difference in repayments between having a R1 000 000 bond with R200 000 in an access facility vs a bond with R800 000 outstanding. The fundamental differences (and take it with a pinch of salt):

  • Access facility means just that, you have access to any extra funds you put in your account. Great for an emergency fund, but easy to spend if you are "bad" with money
  • Extra money in the access facility returns at the rate of your home loan interest but tax free. You pay tax on interest you gain but not on interest you save.
  • Down side obviously is that the rate of return is pretty low compared to what equities are returning, so having too much in the access facility is potentially bad given the low interest rates.
  • You cannot fix the interest rate on a bond with an access facility which is something people may want to do in a year or so's time

 

Personally - I took the access facility to keep my options and access to funds open.

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