Today I would like to talk about the various banks’ product offerings (in other words the difference between how one bank will look at your home loan application vs another).
Most people think that their bank will make the best home loan offer to them, purely because they are clients and loyalty will be shown. While it is true that your own bank will always look at your application favourably, due to the fact that they have more history and information on you than other banks, it is not always a certainty that you are getting the best offer from them.
Let me start by clarifying what I mean by ‘your’ bank. Your primary transactional bank account carries the most weight as this is where your income is deposited and most of your debit orders are deducted from. Having a credit card or secondary savings account with a bank does not mean you are a client of theirs, not for the purposes of this topic anyway. A home loan does carry some weight, but not as much as the primary transactional account.
Let’s say you are a client of bank A and decide to only apply to them for your home loan, because you know someone that works there who promised to ‘pull some strings’ or you heard from a friend that they give the best interest rates, or you are just making the assumption above, that your bank will look after you just because you are a client. Let’s assume bank A is one of the 4 major banks we deal with and their criteria dictates that the rental income you receive on your investment property cannot be used for the application as the bond is not with them… will your application be successful? Probably not as you have the exposure of the bond, but no rental income to offset it. Submit the exact same application to another bank and they approve it because they do, in fact, take the rental income into account, which solves the affordability problem with bank A. You are furious as you have been a client of bank A for a number of years and how is it possible that they decline your application, but another bank where you have no accounts whatsoever, approves your loan?
The same can be said for a person earning income from abroad or a foreign citizen buying property. There are pitfalls you need to be aware of.
We see this often and this is exactly why it is a very good idea to work with a specialist who knows the various banks’ product offerings and criteria for different types of applications. We will structure your home loan application in such a way that you get the best result from the banks we have identified as the most likely to do so.
This is especially true for self-employed individuals (business owners) or applications in the name of a Legal entity (Trust, CC, Pty Ltd, etc).
I often am asked which is the best bank. This is impossible to answer as each application and each applicant is unique, and to pair the application & client to the bank/s most likely to view it in a positive light is exactly what we do. Each bank has their strong points and areas where they can improve (in my humble opinion) so be sure to keep your options open when tackling such a big step. Remember also, the person you speak to from a specific bank will always try to sell their bank as the best, where as a Bond Originator will give you open & realistic advice regarding your options.
Lastly I would like to make you aware of the various campaign offerings the various banks are running at the moment. As I am careful not to be seen to put one bank in a better light than another, I will not call the banks by their names but rather focus on what they are offering.
Bank A has a campaign that says if you are a client of theirs and own a home, bonded to them, but sell that home to buy another and take up home finance with them again, they will pay for your total bond registration costs due to the bond attorneys. On a bond of R1M that means a saving of almost R22 000.
Bank B is currently running a campaign until the end of May where you receive 50% discount on your bond registration costs if you take up a home loan with them, regardless of whether you are a client or not.
Bank C will pay you a cash back refund of up to R6000 should you settle a home loan with them to take up another, together with a 25% discount on the Initiation Fee.
Bank D has no offerings currently and have indicated that none will be forthcoming in the near future.
All of the campaigns above are available to home buyers who work through a Bond Originator for their home loan. They are all trying to reward return business from existing clients.
I see it as my job to make sure we explore all options to ensure we achieve the best possible result for our clients, regardless of the institution.
Please feel free to enquire with me directly if you would like more information on the above.
Yours in Home Loans…
Franchise Owner – Cape Town
082 926 2884 021 180 4541/2 0866 355 496