Pros and cons of getting a home loan online
Depending on your circumstances, a home loan could be the biggest line of credit you take out in your lifetime. So it’s important to be 100% confident when applying for a mortgage, whether it’s online or at a bank branch.
Online home loans are becoming increasingly prominent and popular, particularly in response to COVID-19, with traditional banks and dedicated online lenders offering paper-free applications you can fill out without leaving your living room.
If you’re considering applying online – with an exclusively digital lender or a bricks-and-mortar bank – make sure you read these pros and cons of online home loan applications first.
How do you apply for a home loan online?
While you won’t necessarily have a person walking you through each stage of the process, online applications can be pretty simple. Many online lenders will also have a customer help line or dedicated home loan experts you can get in contact with for assistance.
Required documents and information could differ depending on the lender and your personal finances, but there are a few key items you’ll want to have with you from the get-go. These includes:
- PAYG income verification
- Employer confirmation form (or ABN and GST registration if self-employed)
- Credit card and personal loan statements
- Bank and savings account statements
- ID documents
- Home loan statements for current loan, plus current council rates notice or certificate of title (if you’re already a homeowner and considering refinancing online)
Like all modern marvels, there are benefits and potential issues that can arise in the process of applying for a home loan online. So always keep in mind your financial needs and personal preferences when choosing a mortgage to suit your home-buying needs.
Pros of applying online for a home loan
- You could get lower interest rates and fees
You might be thinking: Why are online mortgage rates lower? Well the theory is, because the lender saves on overheads like physical branches, they can offer lower rates and fewer fees.
But remember, you may not be eligible for the best-value offer. For example, you might not have the required Loan to Value Ratio (LVR) to nab the top interest rate available.
If your smaller deposit comes with a higher interest rate and Lenders Mortgage Insurance (LMI), the overall cost of the home loan may not come out as cheaper than a traditional mortgage. So rather than assume, make sure you research and compare home loan options before applying.
- Applications can be simpler and less time-consuming
Being able to securely and efficiently process things like ID verification, credit checks and other paperwork is a drawcard for many tech-savvy, time-poor consumers. When done well, online applications are made so consumers can understand them without a mortgage broker or banker’s interpretation.
- You can manage your loan digitally
This is a big plus for borrowers who do most of their banking and budget management online. It’s also great for phone-shy homeowners who just want questions answered via a quick email or message through an app.
Cons of applying online for a home loan
- Online applications aren’t suitable for all borrowers
If you don’t feel confident flying solo when choosing and setting up a home loan, it could pay to have a pro walk you through the fine print. You may want to have a physical meeting or handy phone helper to make sure you’re getting home loan features you can make the most out of.
- There’s no branch access
In-person customer service can be a priority for some homeowners – you might not be comfortable with certain technology or have accessibility needs which are difficult to serve online. Others might simply feel a more comprehensive service is provided in-person, and therefore prefer to have branch access.
At the end of the day, the golden rule is to do thorough research and compare all your options.
You can start this journey online using Mozo’s mortgage repayment calculator to see how a home loan could fit into your budget with different interest rates and timeframes applied. Then see if the digital loan life is for you at our online loans centre.