Home loans are big business and you may find offers of help pour in from all quarters when you buy a property, so make sure you are getting the best possible deal.
Bond brokers and "bond origination" companies have sprung up, earning a fee for placing your loan with financial institutions. In some cases, the banks pay them kickbacks of up to two percent of the value of your loan.
Estate agents have for years earned a commission for referring home loan business to banks.
This fee has on average been 0,3 percent of the value of the loan and bigger estate agencies got on average one percent. So a bank would pay about R450 for having a R150 000 loan referred its way.
According to rules set by the Estate Agents Board, the estate agent must disclose to you the fee he or she is earning from the bank and may not steer you to a particular bank, when helping you get a home loan, by implying that its service is better than another. And the agent may not charge you for helping you get a loan unless you have agreed to this upfront.
But mortgage brokers and bond origination companies fall outside the jurisdiction of the Estate Agents Board and there is no legislation regulating their activities.
The latest entrant to the bond origination market is a grouping of some of the major estate agencies, which includes Pam Golding Properties, Seeff, Geffen Estates, Eskel Jawitz Real Estate, Vered Estates and Wakefields. The agents have set up a separate company, MortgageSA.com, and have concluded contracts with three banks: Standard, Nedcor and First National.
The advantage of making use of the services of these brokers or origination companies is that they do the loan legwork for you.
But there are two dangers:
* Brokers or originators that deal exclusively with a limited group of banks cannot say they are getting you the best deal; and
* Your loan could be channelled to the bank that pays the highest commission, rather than one offering you the best rates and terms.
It is believed that MortgageSA. com pockets up to two percent of the value of your loan in kickback fees for referring you to a bank, although spokesman Saul Geffen declined to state a maximum figure. At two percent, this means that the bank will pay up to R3 000 for every R150 000 loan.
MortgageSA.com does not disclose to you the kickback it earns and Geffen says it is not required to do so, as it is not an estate agency. He claims it is not the consumer that pays the commission, but the bank, and that there is no danger of this cost being passed onto you.
Geffen also claims it does not matter that the company deals with three banks only, because it has agreements with these banks, that the banks provide competitive rates for loans brought to them.
Ross Hair, managing director of Bond One, a bond brokerage, says his company provides advice on all home loan related matters and in particular monitors each bank's home loan products, interest rates and costs.
The company has extended its services to assisting existing homeowners to refinance their home loans under better terms and conditions.
It has contracts with 14 banks in South Africa and gets an introductory fee of between 0,3 percent and one percent on the value of the loan from the bank that gets the business.
Hair says his company does disclose commissions that it earns.
TIPS
Your best option is to approach all the banks yourself for the best loan. But if you wish to make use of the services of a bond broker or bond origination company, check on the following:
* The commission the broker gets for placing your loan with banks;
* Whether the broker receives a greater commission from certain institutions. You should do this to check if you are being steered towards a certain institution; and
* How many banks have been approached to give you a loan.