What is an online home loan?
Online home loans are offered by banks and lenders that do not have branch access or employ staff to meet with customers in person.
The trade-off is that you get cheaper interest rates and pay lower ongoing fees, but you will also face stricter lending policies.
Am I better off using a mortgage broker instead?
The fact is every online mortgage allows you to apply online but, ultimately, a human being needs to gets involved at some point for regulatory reasons.
This means there’s no escaping banking errors and delays.
By using a mortgage broker, you get the best of both worlds: a simplified online process with great technology backed by expert advice from specialists in home loan lending policies.
As an online mortgage broker we:
- Understand how important value, convenience and choice is to our customers which is why we have strong relationships with almost 40 lenders.
- Have the technology and systems in place to simplify the home loan process.
- Have some lenders on our panel that don’t require you to meet with them face-to-face.
- Can negotiate a great interest rate and reduced mortgage fees on your behalf.
- Can build a strong case to get exceptions to standard lending policies if your situation is a little outside the box, whether you’re self-employed, have a bad credit file, are a non-resident, or you want to a buy a property for your SMSF or trust.
- Can usually offer our services for free.
Online lenders are very risk-averse, and we know lenders that will take a more common sense approach to your situation and what you’re trying to achieve.
Call us on 1300 889 743 or fill in our free assessment form to discover more benefits of using Home Loan Experts.
How much can I borrow with an online home loan?
Some online mortgages won’t allow you to borrow more than 80% of the property value, although there are many that will allow you to borrow up to 95%.
Will I get a cheaper interest rate?
Generally speaking, yes, online lenders tend to offer cheaper home loan rates and have lower set-up costs and ongoing fees.
These lenders don’t have to pay the same overheads as a traditional lender such as physical branches, the salaries of thousands of customer-facing staff, or even pay shareholder dividends.
Because of this, they pass these savings onto you. Well, that’s the logic, anyway.
Many factors affect a bank’s cost of funds and how they price their home loans.
You may get a better rate with a major bank or second-tier lender.
What are the main benefits of an online home loan?
Apart from cheaper rates, the pros of an online home loan really depend on what kind of customer experience you’re after:
- You’ll save time and hassle by not having to go to a branch directly to apply for your home loan, particularly when it comes to Verification of Identity (VoI), which courier-type services like ZipID can now verify without you needing to see someone in person.
- You can manage your home loan through an online portal and mobile app or by speaking with a customer service representative over the phone.
- You can access flexible home loan features for a lower price than if you were to get a traditional home loan.
Online home loans are designed for time-poor borrowers who want a simple home loan that they can “set and forget”.
What are the drawbacks of an online home loan?
Generally speaking, online lenders struggle with customer situations and properties that are outside of the box.
You’ll struggle to get approval if:
- You’re buying a property in a rural or regional location.
- Your property is unique in any way.
- You need a construction loan.
- You have unusual employment or you need a low doc loan.
- You have a bad credit history.
- You’re buying in a complicated trust structure (many of these lenders don’t have the expertise).
Other cons include:
- No branch access.
- Some home loan features may not be available.
- There can be significant delays at certain times of the year because online banks have smaller processing and admin teams.
To get approved for an online home loan, you generally need to be a “vanilla” customer with a PAYG job and buying a standard residential property.
Not having branch access and the ability to speak to someone in person is often the clincher for most people.
For example, you may prefer a one-on-one conversation with a real human if you’re looking to access equity to renovate or to buy an investment property.
Again, you need to consider what type of customer experience you want after your home loan settles.
Who are online lenders?
There are many online lenders in the Australian market.
Listed below are just a few that we’ve reviewed:
- Click Loans
- ME Bank
- State Custodians
- Athena Home Loans
- Australian Mortgage Marketplace (AMM)
There are some major banks and lenders that offer cheap online home loans as an alternative to branch access, such as Bendigo Bank’s Bendigo Express (in partnership with technology platform Tic:Toc)
These “no frill” mortgages are in many ways the same type of basic home loan packages that have been offered for years.
Are online lenders safe?
Most banks and lenders are governed by the Australian Prudential Regulation Authority (APRA), and they must adhere to the National Consumer Credit Protection Act 2009 (NCCP Act).
Some online lenders aren’t governed by APRA, but they need to adhere to guidelines set out by the Australian Securities and Investments Commission (ASIC).
That means you still have consumer protection rights, including the right to make a complaint through the Australian Financial Complaints Authority (AFCA).
The AFCA almost always finds in favour of customers.
As a minimum, check that the online lender has their Australian Credit Licence (ACL) and it’s listed on their website.
You can then check the ACL number using ASIC’s professional register to ensure that they are an authorised ACL holder or credit representative.
Need a home loan?
If you’re after a basic home loan with a great interest rate, call us on 1300 889 743 or complete our online enquiry form today.
We’re home loan specialists that can properly consider your needs to find you the right home loan solution.