Compare home loans from online lenders

Regardless of whether you're a first home buyer or you're buying an investment property, and whether your home loan is with a major bank, a smaller bank, or a non-bank mortgage lender, chances are that at least part of the application process will take place online. Where an owner occupier or investor may have once filled out paper application forms and sent off supporting documentation by fax or express post, today you may be able to manage the entire process from home on your laptop, or even using your tablet or smartphone.

Some specialist mortgage lenders are taking online home loans to their logical conclusion and conducting their entire operation online.  As these lenders don’t need to worry about the upkeep costs of maintaining branches or ATMS, or offering other financial products than just home loans, online-only mortgage lenders can often provide new customers with some great rates compared to some of the large banks.

Taking these concepts a step further are neobanks – online-only financial institutions that operate via apps. Only a few neobanks are operating at the time of writing, and only a few of those are offering home loan products, though you can expect more to follow in the future.

Almost every mortgage provider in Australia, including traditional banks and online-only lenders, should be able to offer home loan pre-approval online.

This is where you provide the lender with information about your income, expenses, assets and expenses, which they will then analyse to work out how much you may be able to afford in monthly repayments, and in turn, the loan amount the lender may be willing to lend you.

Obtaining a pre-approval from a lender is often handy when you haven’t yet found the perfect property, as it can give you a more concrete idea of your maximum budget. This can help you to negotiate with real estate agents with confidence, or bid at an auction for a new home with less risk of accidentally spending more than you can afford.

Keep in mind that pre-approval on a mortgage is not the same as having a mortgage application approved. While you’re less likely to be turned down for a home loan if you’ve already received pre-approval, the lender could still decline you when the time comes to make a formal home loan application, such as if the valuation came up short or your financial situation has changed.

Two of the main concerns that many Aussies have when it comes to applying for a home loan online are around the safety of their money (“what if the bank goes out of business?”) and the safety of their personal details (“what if my account gets hacked?”).

One way to help build your confidence in an online mortgage lender is to check its credentials. If the lender has an Australian Credit License (ACL) you know they are expected to follow proper regulations when providing home loans and are obliged to lend money responsibly.

Several online mortgage lenders are backed by bigger banks, offering not only their finances but their legal protections as well. Doing a little digging into who owns an online lender and where it sources its funding from may be able to help build your confidence in its performance. For example, if the bank backing an online lender is an authorised deposit-taking institution (ADI) then money deposited with the bank is guaranteed by the government up to a point.

Every online lender should have thorough encoding and security settings in place, to help protect your data and your money from malicious code. Online security features such as encryptions, two-factor authentication and more can all help you keep your personal information safe at every step of the home loan process, from the initial online application to your regular repayments.

Compared to the bigger banks, online-only mortgage lenders tend to be smaller organisations, meaning they may be able to offer lower interest rates and upfront and ongoing fees to their home loan customers (check their comparison rate to get a better idea of the overall combined cost of the loan over the loan term). This is because with no branches to manage, they often have fewer overheads to cover. 

These lower costs could make online home loan options particularly appealing for borrowers wanting to refinance onto a lower interest rate. And if an online lender also offers savings accounts, personal loans or similar financial products, you may find that their rates and fees are similarly competitive.

Online lenders may also have advantages around technology and innovations compared to some of their big bank competitors. If you’re confident about managing your home loan and other accounts from your smartphone or laptop, you may find you’re in a position to benefit from new financial products and services that change the way you think about personal finance.

An online mortgage may not be the best option for every borrower. Many online mortgage lenders are specialists, meaning they only provide home loans, with no option for savings accounts, personal loans, credit cards or other financial products. This could make them less convenient if you prefer to do all of your banking in one place.

While some online mortgage lenders may offer home loans with low interest rates and fees, you'll still need to fulfil their eligibility criteria to successfully apply, which may include having a low loan to value ratio (LVR). If this lending criteria doesn't match the situation with your property value, you may not be in a position to benefit from these rates.

The low-rate home loans offered by online lenders may not offer as many extra features and benefits as some other options. While the interest repayments could be more affordable, you may also miss out on flexible features and benefits such as an offset account, a redraw facility, or the ability to make extra repayments. Some of the major mortgage lenders may also offer cashback deals for new customers. 

Additionally, as online-only lenders don’t have branches to visit, you won’t have the options to talk over your home loan in person. Many online lenders can also be contacted by telephone, though some operate solely online, through apps, and via email.

Finding the best online mortgage lender for your needs is much like finding the best traditional lender. Comparing home loan interest rates, fees, features and benefits can often be a good start, and a quick and simple way to do so is by using RateCity’s comparison tables. 

You can use the filters to narrow down your home loan shortlist to just the lenders that may match your needs (for example, choosing between variable rate or fixed rate home loans, or principal & interest or interest-only repayments, depending on your preferences), and check the Real Time Ratings™ to get a better idea of what overall value they may offer. You can also check out some award-winning options from RateCity's Gold Awards. 

You can also use RateCity's calculators to help you estimate the cost of your home loan repayments, your borrowing power, and more, whether you're buying or refinancing. If your deposit is on the low side, you can also calculate what you may pay in Lenders Mortgage Insurance (LMI). 

Additionally, when it comes to online lenders, you may also want to take a closer look at reviews from other satisfied (or less than satisfied) customers, to get a better idea of what you can expect from their online customer service, and how useful their apps and tools may prove for you.