Want a cheaper home loan? Online lenders are where it’s at

Article by Mozo

Gone are the days when Aussies would only take out a home loan with a big bank, as there are now a great range of online only lenders offering some of the lowest rates in the market, which could potentially save you thousands, if not tens of thousands over the life of the loan.

You might be wondering “who are these online lenders?”, “are they really trustworthy?” and have plenty of other question. That’s where our guide comes in, providing a full run down of the different home loan players and the potential savings that could be made by making the switch to an online lender.

The who’s who of the home loan world

Before you sign up with an online lender you probably want to know exactly what they are about. Here’s a quick overview of the different players in the home loan market and who they are suited to:

Lender type Best for
Credit Unions & Mutuals Borrowers who want to be treated like a real customer not a number & be part of an organisation that gives back to members not just shareholders.
Non-Bank & Online lender Online-natives who want the sharpest rate and don’t mind a bit of DIY to get it
Small Bank lender Those looking for the security of borrowing from a bank but a more personal level of service and competitive rates.
Big 4 Bank Best for more complicated loans or large loan amounts or for existing Big 4 customers who want all their banking in one place.

Are online home loan lenders trustworthy?

Unlike the major banks in Australia, smaller online lenders aren’t regulated by the Australian Prudential Regulation Authority. However, there are lending benchmarks that all lenders must adhere to that have been set by the Australian Securities and Investments Commission (ASIC) aimed at protecting you as a borrower, which include obligations like “acting efficiently honestly and fairly”.

When deciding if a home loan lender is trustworthy, your best bet is to read reviews from customers just like you by visiting our rate and review section.

How much can an online lender save me?

Refinancing your current home loan to an online only lender could potentially save you thousands, as online lenders don’t have the same overheads as the majors like paying dividends back to shareholders.

When we crunched the numbers we found a borrower could save $2,148* a year by switching from the average Big 4 home loan to an online lender - money that’s better off in your bank than theirs!

In fact, 70% of all rates under 4% are from non-traditional, online-only lenders like iMortgage, loans.com.au and UBank.

To give you an idea of how much you could save on your monthly repayments here’s a comparison of the average rates against 5 of the best, using the example of a $300,000 home loan paid back over 25 years:

Home loan package Rate Max LVR Lender type Monthly repayments
Avg variable 4.66% NA NA $1,695
Avg Big 4 4.90% NA NA $1,736
iMortgage Fusion 80 3.84% 80% Online $1,557
Click Loans The Online Home Loan 3.91% 70% Online $1,569
Yellow Brick Rate Smasher Road 3.91% 70% Online & branches $1,569
Homestar Owner Occupier Loan 3.94% 85% Online $1,574
UBank UHomeLoan - Spring Offer 3.99% 80% Online $1,582

As the table above shows, your ongoing repayments will be significantly lower if you go for one of the low rate deals under 4% currently available in the home loan market.

A saving of $179 per month by switching from the average Big 4 rate to the best on market may not seem like much but is better off going towards extra mortgage repayments, covering household bills or even better yet, stashed away in a savings account earning interest.

How do I find an online lender?

Online of course! Simply enter your details into our home loan comparison tool and our search engine will reveal some of the lowest rate and fee loans available in the market for your situation.

Is it difficult to apply?

Applying is easy, all you need is a few hours to gather all your documentation and get clicking. Some of the paperwork you may need includes:

  • PAYG income verification
  • Employer consent form
  • Credit card and personal loan statements
  • Bank and savings account statements 
  • ID documents
  • Home loan statements for current loan
  • Council rates notice or certificate of title

Keep in mind, the above documents are a general guide of what you may need to upload when refinancing to an online lender but you’ll need to check with the lender for specific requirements.

*Savings figure is based on switching a $300,000, 80% LVR, 25 year P&I loan from the average Big 4 variable home loan rate of 4.90% to the lowest variable rate available from online lender, iMortgage (3.84%).

Refinancing guides