Article by Mozo
From the big bank players to the small online only lenders, the mortgage world offers plenty of choice when it comes to selecting a home loan lender.
As there’s no one size fits all, deciding which home loan lender ticks the boxes for you isn’t always an easy choice.
Let us help you pick your match, with this rundown on the different types of home loan lenders in Australia:
Often your first thought when it comes to choosing a home loan lender might be the familiar faces of the major banks like Westpac, CommBank, ANZ and NAB. But it’s important to keep in mind the big players are known for charging higher interest rates and fees than smaller providers, as they have to cover costs like branches, bank managers and paying dividends to shareholders.
However, there are some positive aspects of banking with a major. For instance, big banks often have competitive bundling offers, which means if you’re willing to bundle your home loan with other banking products like your credit card, you could be handed a home loan with a lower rate and some of the fees may be wiped.
Another reason that many Aussies take out a home loan through a major bank is because of the branch accessibility, which means you can meet with a branch manager at each stage of the home loan process. You’ll also have access to a wide ATM network, an important feature for home loan borrowers taking out a mortgage with an offset account and can take advantage of the major bank’s free smartphone apps, which make banking on the go a breeze.
Here are some the major players in Australia:
The big four aren’t the only major players downunder, here are some of the other big banks to choose from:
To see more big home loan players, head on over to our major banks comparison section.
If you want to look outside the big banks, then a popular choice is going for a challenger brand like a mutual bank, credit union or building society that works around the philosophy of returning profits to members. When you take out a home loan through one of these providers you will need to pay a small membership fee, which is around $10.
The major benefit of taking out a home loan through a mutual or credit union is that you will generally receive much lower rates and fees than with a big bank. This is because they don’t have to pay dividends to shareholders and can instead return profits to members (i.e customers) in the form of more competitive home loan deals.
Here are some of the customer owned lenders that provide home loans in Australia:
Are you comfortable with applying for a home loan and managing it day to day via the internet? Then an online only home loan could be just for you. Without the cost of paying for bricks and mortar outlets, these challenger brands can afford to offer more competitive rates and lower fees to customers.
If you’re considering taking out a home loan through an online only lender, it’s a good idea to read the experiences of other home loan customers just like you to see whether the provider offers the goods when it comes to everything from customer service to convenience.
It’s also important to think about the features you are looking for in a home loan. For instance, many online only providers don’t offer loans with a revolving line of credit. And if you want to take out a home loan that comes with an offset account, it’s wise to check that the online provider you sign up with has a generous ATM network. For example loans.com.au’s Offset Variable home loan offers 5 free transactions every month via the Westpac, St.George, Bank SA and CueCard ATM networks.
Let’s run through some of the online only lenders that offer competitive home loan deals:
No matter which lender you decide to go with, when choosing a home loan you should look for one that has the following:
Competitive interest rate: A low interest rate can make a significant difference to the amount of interest you’ll pay in the long run. For instance, the difference between a 4% and 4.5% interest rate on a $300,000 home loan over 25 years is $25,196. You should also look at the comparison rate when comparing home loans, as this merges the headline rate with some of the common fees (e.g application and ongoing fees). This will quickly show you if the loan is still a competitive deal once the fees are added to the equation.
Low fees: Home loans can come with a range of fees attached like an application fee that you pay upfront, an ongoing monthly service fee or a break cost fee (on fixed rate loan). So don’t forget to check what the associated fees are, to ensure you’re not only receiving a great rate but low fees as well.
Flexible features: Look for a mortgage package that comes with features that will help you pay off your home loan sooner like an extra repayments facility or offset account. Fee free extra repayments mean you can pump additional cash into your home loan whenever you please (AKA when you receive that well deserved promotion). Alternatively a home loan that comes with an offset account could be for you, which offsets any money you have in the account daily against your home loan principal. For a full rundown on the home loan features to look for, read our Home loan features in a nutshell guide.
Want to compare over 100 home loans in our database right now? Punch in your numbers into our home loan comparison tool to begin your search.