The declining interest rate and the appreciation of property values set a very inviting platform for current homeowners to extend existing bonds. First time home buyers also reap the benefit of the lower interest rates as most financial institutions are willing to give homeowners up to prime less 1.5% and 2%.
Facilitating this process is the bond originator. These individuals aid the applicant in the bringing of the application and in doing so earn a commission "payable by the bank" should the application be approved and the bond registered. Although bank employees should be able to provide the same service for the client, most people use the bond originators as they apparently have a better negotiating platform with a wider variety of financial institutions. On the face of it, the client gets the best deal and therefore should not concern himself/herself with the rest of it.
Unfortunately, some bond originators require the client to sign a "Sole Mandate" whereby the client will pay the bond originator an amount upon the bond being granted or registered. Should the client approach another bond originator or a financial institution to apply for a higher bond amount, or for better bond terms, the original bond originator might still enforce the mandate should the first application have been successful.
This now places the client in the unfortunate position that the bond originator might sue him/her for the costs on the bond that was never registered by the client.
This practice amongst bond originators is the exception rather than the rule and most bond originators will not require the client to sign such a mandate. Clients will however be well advised to re-think the signing of any mandate with a bond originator prior to discussing it with their legal
advisors. Although the bond originator does supply a much-needed service, there will always be the selected few who will endeavour to taint the face of the business.
Freedom of choice is paramount. As an Originator I believe that the client need not sign any mandate with Originating firms. We are here to add value!!