You’ve invested time and effort in looking for the perfect home, but are you wondering which is the best kind of lender to finance your home purchase?
Which Bank Is The Best For Home Loans In Australia?
Buying a home is a huge financial commitment, and you don’t want your home loan with a bank that does not understand your situation. Going directly with the bank you already have a relationship with might not be the best option, as it might not have the best interest rates or a home loan that suits your situation.
You have to work with a bank that can help you get approved. Choose one that provides you with the right home loan and their best services.
In Australia, you can get home loans from:
- Banks (which includes the big four banks and their subsidiaries)
- Customer-owned banks (mutual banks, credit unions and building societies)
- Neo-banks (online lenders)
|Point of Difference||Banks||Customer-owned banks||Neo-banks||Non-banks|
|What are they?||Financial institutions that are owned by shareholders||Financial institutions that are owned by customers||Their banking services are 100% online||Does the same functions as a normal bank except taking deposits|
|Can they take deposits?||Yes||Yes||Yes||No|
|Services offered||Savings accounts, checking accounts, home loans, car loans, personal loans, credit cards, etc.||Savings accounts, checking accounts, home loans, car loans, personal loans, credit cards, etc.||Savings accounts, checking accounts, home loans, car loans, personal loans, credit cards, etc.||Home loans, car loans, personal loans, credit cards, etc.|
|Prices and fees||Might not be as competitive as smaller lenders||Members enjoy discounts and lower fees||Savings on overhead are passed on to customers in terms of lower fees and competitive interest rates||Competitive interest rates compared with the big banks.|
|Customer service||Tend to have poor service and a history of playing games with borrowers interest rates after they get the loan||Good customer service||Exceptional customer experience||Usually have much better service than big banks|
|Lending policy||There are some policy niches, but it varies among banks||Their policies offer benefits and discounts for members||Their approval criteria can be strict||They have lenient lending policies, but interest rates can be high.|
|Who is it best for?||Better for loans less than $2 million due to negotiated pricing||Great if you’re a member of the bank||Great if you’re borrowing up to 80% of the property value||Great for borrowers with unique needs and those who fall outside of bank policy|
|Branches||Big banks have multiple branches||Their branches could be limited to one or two states||No branches, as their services are 100% digital||Fewer branches than big banks|
|Examples||ANZ, CBA, NAB, Westpac, St. George||Teachers Mutual Bank||86 400, Volt||Pepper Money, Liberty|
We have extensive reviews of many lenders to help you narrow down your options.
How Are Neo-banks Different From Traditional Banks?
While both neo-banks and traditional banks are authorised deposit-taking institutions (ADIs), neo-banks are 100% digital and do not have any physical presence. Traditional banks do offer online banking services but they often use legacy technology, which can be outdated.
|Most have been around for more than 50 years||Made their entry during the past decade|
|Fees and interest rates can be high. Their fee structures can be complex.||Fees and interest rates are competitive, as they don’t have the overhead costs of maintaining physical offices.|
|Branches available around Australia||Do not have branches; services are 100% online|
|Most offer home loans||Only a handful offer home loans.|
Are Small Banks Better For Mortgages?
Most borrowers choose smaller banks if they have had a bad experience working with big banks or have been turned down for a home loan. If you’re after competitive interest rates, then your decision might skew towards a smaller lender. However, big banks offer convenience and a variety of home loan options. Most borrowers opt for big banks if they already have an account with them and want the convenience of having all their financial products in one place.
It may boil down to who will approve your mortgage application. The choice is subjective and depends on your financial situation.
How To Choose A Lender When Buying A House
Ask these five questions to narrow down your choice and find the right bank for your home loan.
1. What’s the best interest rate you can offer?
Look beyond advertised rates, as these are used to lure you in. These rates have caveats like restrictions on the loan amount and loan term. Also, be wary of honeymoon rates, which are low only during the introductory period and will revert to a higher variable rate once the period ends.
Also keep in mind that interest rates aren’t everything. A lender with a higher rate might offer better services and get you approved for a mortgage when other lenders won’t.
2. What fees are applicable?
Some banks can waive fees, while other loans are applicable throughout the life of the loan. Some banks charge fees when you use services like offset, redraw, etc. Understanding a lender’s fee structure is critical to working out the total cost of a home loan.
3. What Types Of Mortgages Do You Provide?
Deciding on the type of loan you need will help you narrow down your choices for a lender. Big banks are good for borrowers who fit the cookie-cutter lending criteria (great credit score, stable income), while non-banks offer loans for borrowers who don’t quite measure up on the lending criteria. These banks offer niche loans for borrowers with bad credit, those who are self-employed and even for those in Australia on temporary visas.
4. How Fast Does The Bank Respond?
Miscommunication can easily cause settlement delays. Call the lender to find out if they’re available to answer all your questions. If you enquire and they take a week to call you back, that’s not a great sign. You want the bank to be invested in your home buying journey.
5. Have You Asked For A Referral?
Sometimes, your agent already has a list of banks they frequently work with that are providing amazing customer service. Talk to your agent and ask how it is to work with the bank and about whether the process was smooth. Your friends and family might also be happy to provide a referral to a bank.
Seek The Help Of An Expert
Looking for the right bank on your own is time-consuming, and you might end up with a home loan that’s not the right fit for you. That’s why it’s good to take the help of an expert mortgage broker.
At Home Loan Experts, we have access to more than 50 lenders. We help you through settlement and beyond so you get a competitive interest rate and convenient features for your home loan. These are just a few of the reasons a mortgage broker is better than a bank. Give us a call on 1300 889 743 or enquire online today.