Home Loan Lenders

When it comes to choosing a home loan lender there are literally hundreds of financial institutions in Australia offering mortgage products. Therefore it is not surprising that you would feel daunted by the prospect of choosing a home loan lender from such a range. One of the first decisions you will need to make when looking at the home loans from different lenders is the type of lender you would like to borrow from as you have the choice of:

• Home loans from the big banks.
• Second tier banks not part of the big four.
• Credit unions and building societies which are not publicly listed companies.
• Mortgage managers whose source their own funds to finance your home.

To help you decide on the home loan lender who can offer you the product which best suits your needs and the service which helps you best manage your mortgage, follow these simple processes to start your decision-making.

1 Decide how much you want to borrow

This isn’t about how much you are entitled to borrow according to your income, expenses and other debt, but instead you should decide what percentage of the value of the property you want to make your home that you are going to borrow. Of course the less you borrow the smaller your repayments but not everyone is in a position to make a 50% deposit on their home loan. Instead look at the value of repayments you are able to budget for in relation to the savings you have to put towards a deposit. Also decide how committed you want to be to your home loan and whether you would like to retain some leverage by having a loan which is significantly less than the value of your property.
It is important to have an idea of the percentage of the property value you want to borrow because every lender will have different lending options where some will allow you to borrow 100% of the amount you need to buy a home where others will require a 5% deposit and even more will require a 10% deposit.

2 Do you want a big bank?

The big four banks in Australia are Commonwealth Bank, Westpac, ANZ and NAB and all four offer a range of home loan products which can suit everyone from a first home buyer looking for an affordable loan, to a retiree looking for a reverse mortgage. You may also have your other transaction accounts with a big bank already and while home loan account is used and should be compared very differently from an everyday account if you feel you have a good relationship with your current bank you may want to maintain the relationship.

If you have found a big bank which you are happy with either through other banking dealings or through a trial called to their call centre or a visit to their branch, then you may want to compare the home loans based on the features offered and the affordability of the interest rates and fees. Just keep in mind that overall big banks tend to not perform as well in customer service and customer satisfaction surveys as compared to second-tier banks, and credit unions and building societies.

3 Are the smaller banks as safe?

Many second-tier banks, that is those not part of the big four or owned by any of the big four, are able to offer competitive features, fees and interest rates because they specialise in certain types of loans and have lower running costs. Smaller banks are also just as safe as the big banks because all financial institutions in Australia are regulated by independent government bodies and must be authorised to operate in the financial industry. You can also make your own comparisons of a smaller banks security and safety by considering its credit rating which you should find on its website.

4 Building society and credit union considerations

Where banks are publicly listed and have shareholders, building societies and credit unions are not. This means that instead of returning their profits to their shareholders as dividends in the way that the bank would, building society or credit union returns their profits to their members by being able to offer more affordable home loan products and lower interest rates. Building societies and credit unions are also run by the members who hold financial products with a financial institution and as a member you would be able to vote on the management of your lending institution while still having the choice of all of the popular home loan products and features.

5 The difference of a mortgage manager

A mortgage manager is another type of non-bank lender and they provide their own home loan products by independently sourcing their finance from Australian and international markets. As they build their finances themselves mortgage manager lenders are often able to offer you a lower interest rate on your home loan because they don’t have to deal with any ‘middlemen’. While mortgage manager lenders are relatively new on the home loan lending seen they are still required to be fully registered and remain independently regulated to ensure you are offered fair and affordable products.

6 Getting preapproval

Once you have decided on the lender you want to work with to make your dream home a reality it is best to seek preapproval in writing so that you know exactly how much you are able to borrow and how much that calculates as monthly repayments. Pre-approval will make the overall home loan application process much easier as you are afforded greater bargaining power when you have found the right home and will know your budget from the start. Getting your preapproval in writing should also secure you any special promotions your lender has on at the moment as well as any special offers discussed in your meeting with regards to fee waivers or additional features.