Broker identifies niche in the mortgages market
Keikantse Lesemela | Thursday October 23, 2014 15:34
BusinessWeek: Give us background on your company and its services…
Bhoola: Bond Brokers is one of the first independent mortgage brokers in Botswana. We work independently with banks, estate agents and developers and focus on the client, to provide service from the loan application to process to the approval. Our personnel ensure that the client has access to comprehensive information on the various loan facilities on offer at the local banks. They also assess which package would be the suitable for each client’s personal financial circumstances.
BusinessWeek: Do you choose which bank to work with or the client decides?
Bhoola: We send our clients’ mortgage applications to all of the banks, unless our client has specifically instructed otherwise. We then present the offers from all the banks to our clients, who have the last say.
BusinessWeek: Why should a potential borrower come to you when they can approach the bank directly?
Bhoola: In South Africa, it is estimated that over 70 percent of home loans are concluded through a bond broker, which shows the success rate of this method. Clients can use the traditional method of approaching the banks directly, yes, but there with the bond broker the client stands a better chance of getting approval since we approach different backs at the same time. We also find the better rate and present all the offers to our clients. The most important factor is the convenience we provide. There is no need for our clients to queue at banks. We do all the follow-ups on their behalf.
BusinessWeek: Don’t you think that since you are the middleman between the client and bank, the turnaround time for the loan to be approved will be affected?
Bhoola: It will affect turnaround times in a positive way. Since the banks know that the applications they receive from us are also sent to several other competing banks, it will motivate the banks to make decisions quicker.
BusinessWeek: Government has expressed concern that Batswana are highly indebted, which they say is caused by financial illiteracy. What are you doing to improve the situation?
Bhoola: It is true that Batswana are highly indebted. Broadly speaking we can classify debt, as either “good debt” or “bad debt.” Bad debt is debt acquired to buy things that rapidly lose their value and do not generate long-term income. An example would be a debt incurred to purchase clothes. Good debt on the other hand, is used to purchase an investment that will grow in value or generate long-term income. Purchasing a home would be considered a good debt, as the value of your home should increase. We want to educate and actively pre-qualify the public to encourage them to rather purchase appreciating assets like property instead of incurring short-term debt.
We also look at our client’s finances to manage their expectations on the value of the house that they could afford, taking into consideration their income and expenses.
BusinessWeek: Are there instances where you advise a client not to apply for a loan?
Bhoola: Although each client case is unique, yes, there are instances when we advise a client against applying for a loan. A typical example would be if we realise that a client does not have an income that would provide sufficient affordability to pay back the loan.
BusinessWeek: Is there a select class of people who qualify for your services or you assist everyone?
Bhoola: Our doors are open to the public at large. However, with that in mind, our business can be described as loan facilitators. We do not provide any funding in our capacity as Bond Brokers and thus we are bound by the business rules of the banks.
So basically, if a client say, qualifies for a mortgage from a bank if they were to approach it directly, then they would probably benefit from our services as Bond brokers.
BusinessWeek: How many banks do you deal with?
Bhoola: We have agreements with most major banks. We are working on finalising our agreements with the banks that we had not entered into formal agreements with as yet. Our ultimate goal is to have agreements with all mortgage lending institutions in Botswana. This would offer our clients as many options as possible.
BusinessWeek: Who pays you for the services and at what stage of the application process?
Bhoola: We are remunerated by the banks and its only after a loan has been approved and disbursed.
BusinessWeek: Do you offer clients any counseling or advice beforehand?
Bhoola: There are guidelines stipulated by The Bank of Botswana. We calculate ratio of the person’s salary to figure if they can afford repayments towards the home loan. Since these guidelines are in place for a good reason, we usually advise our clients to highly consider affordability. In that instance, we view ourselves as more than just a link to banks because we also discuss key issues with our clients.