If you’ve never applied for a home loan online before, it’s easy to feel nervous about the prospect of making a major financial commitment by clicking a mouse or tapping a smartphone. But there are benefits to online home loans, which are often much safer than you may expect.
Laws and regulations also apply to online lenders
Mortgage lenders in Australia, including online lenders, are legally required to follow rules and regulations that help protect borrowers.
If an online lender is an Authorised Deposit-taking Institution (ADI) that also offers savings accounts and term deposits, they are obliged to follow the regulations laid out by the Australian Prudential Regulation Authority (APRA). Online lenders that only offer mortgages aren’t governed by APRA, but still need to follow the rules set out by the Australian Securities and Investments Commission (ASIC).
If you’re concerned about whether an online lender is trustworthy, a good place to start could be to check their publicly available Australian Credit License (ACL). And if you experience any problems with a lender, you can contact the Australian Financial Complaints Authority (AFCA).
Digital encryption protects your data
Applying for a mortgage online involves completing online forms and uploading scans or photos of documents, such as personal identification, payslips and bank statements. As such, you may be worried about this sensitive information being leaked online or left vulnerable to hackers, scammers and identity thieves.
Online lenders (and traditional lenders too) use sophisticated encryption technology to protect the personal data of mortgage customers. Regular updates to their systems and processes mean you can be confident about digitally uploading and signing mortgage documents.
No paperwork means less chance of human error or worse
With little to no physical paperwork involved, applying for a mortgage online means there’s nothing for a postal worker, courier or office worker to temporarily misplace, permanently lose, or forget to shred before disposal. This means you’re less likely to experience delays to your mortgage application due to delivery issues, and your documents are less likely to go missing, or to end up in the hands of scammers or identity thieves.
Automatic processes allow for faster, more accurate and more convenient applications
Rather than waiting for business hours to roll around so you can call or meet with your bank or mortgage broker to complete your home loan application, you can often apply for a mortgage online at any time of the day or night.
Online lenders that use digital tools to collect and process mortgage applications may be able to tell you sooner whether your home loan is likely to be approved, with less chance of human error leading to misunderstandings and problems.
That said, you’ll likely need to wait for a human employee to verify your application before your approval can be confirmed.
Lower rates and fees
If you apply with an online-only lender, you may be able to get a cheaper home loan deal than with some of the bigger banks. As online lenders don’t have to manage the upkeep costs of branch and ATM networks, they often charge less for home loans than the major lenders, which can result in you paying less in fees and interest on your mortgage.
What are the drawbacks of online home loans?
While online home loans are often safer than you may expect, they may still have limitations to keep in mind before you apply.
Applying for a standard home loan online may be a fairly straightforward process. But if your mortgage doesn’t tick all of the typical boxes (e.g. low doc loans, construction loans), you may need to contact a lender and/or a mortgage broker to work out a loan structure that suits your needs.
Online lenders are often smaller operations than the major banks, which may allow them to offer cheaper deals and more personalised customer service. However, it may also mean having fewer loan options to choose from, or missing out on some home loan features. And depending on the size of their team, you may need to wait for longer until an employee becomes available to handle your enquiry and/or to process your application.
If you’re not sure whether an online lender is the best choice for your home loan, consider contacting a mortgage broker for advice.