UBank UHome Loan Review


Nicki Bourlioufas
Dec 14, 2016( 8 min read )

Pros
  • No application fees.
  • No ongoing fees.
  • Additional repayments allowed.
  • Extra low interest rate.
Cons
  • Not available for self employed.
  • $395 fee each time you lock a fixed rate.
  • No offset account.
  • No customer branches.

The basics

UBank’s UHome Loan offers customers the choice between fixed and variable rates at competitive prices and ultra low fees.

UBank is an online lender which means borrowers must complete the UHomeLoan application online and UBank will keep them up-to-date throughout the entire process by emails. If you get stuck, however, you can always pick up the phone to ask a question or talk through a potential problem.

SPECIAL OFFER

UBank Value Offer

Enjoy a homeloan with $0 application fee, $0 ongoing fees and redraw facilities available. Min. 20% deposit required.

As an online lender, UBank has fewer overheads, which in turn means lower fees and interest rates for you.  A big attraction is that there is no upfront fee to apply for a home loan, something other low-cost lenders even charge.  Once your loan is up and running, there are no ongoing fees for either fixed or variable loans.

The UHomeLoans offers flexible features such as the ability to make unlimited free redraws and repayments on variable loans and the ability to split between different loan types. Although UBank offers the perks of a small lender, it is backed by one of the largest lenders in the home loan market, National Australia Bank (NAB).

But the absence of some features, such as a 100 per cent offset account facility, and a relatively high fee to lock in a fixed rate, may put some borrowers off. As with any product, you need to conduct a complete review of the benefits to understand if this product is for you.

More specific product information is available here.

Review of the highlights

The great thing about UBank home loans is that the fees really are low. There are no application fees to set up a mortgage nor are there any ongoing or discharge fees. Not many home lenders can make this claim about a low-cost product.

UBank fixed rate owner occupied loans

Added to that, the variable UHomeLoan is a flexible option for owner occupiers or investors, however as with many other lenders these days, investors who are buying to rent the property out will pay a higher rate than owner-occupiers who plan to live in the property.

UBank’s UHomeLoan comes with a fee-free unlimited redraw facility that allows you to draw back some cash if you are ahead on your repayments. Or you can make unlimited additional repayments at no cost, which will help you to reduce interest costs over the life of the loan.

UBank variable rate owner occupied loans

Like most lenders, UBank also lets you select how frequently you want to pay back your loan with the options of weekly, fortnightly or monthly repayments. You can have up to four splits on your UHomeLoan, with a minimum amount of $20,000 per split. So you can, for example, split your loan between fixed and variable portions, which could help soften the impact of future interest rate rises.

While you can make unlimited repayments on your variable home loan, can only repay a limited amount on a fixed product, although this is fairly standard for many fixed rate products, while some don’t let you make any extra repayments at all.

UBank will let investors pay interest-only for up to 10 years, which is a fairly generous time period, while owner occupiers can switch to just paying interest for a maximum of five years. Interest-only loans are popular among investors as they maximise any available interest deductions and can free up cash flow for other investments. Be careful though: if you take up an interest-only option you will pay more in the long run.

UBank investor home loans

UBank may also give you a small loyalty discount off the standard variable rate once you’ve held your home loan for three consecutive years or following a fixed loan expiry, whichever is greater.

If you decide to move house, UBank’s ‘portability’ option means you can transfer your existing UHomeLoan to a new property, saving you potentially hundreds of dollars in fees. But watch the conditions here: for the loan to be portable, the sale of your current property must occur before you buy the new property or it must be on the same date.

Another example of UBank’s flexibility is the option of topping up your loan. If you’re planning on renovating or improving your property, or you want to consolidate debt, borrowing more money with your existing home loan may be a cost effective option. You can borrow additional funds using your existing UHomeLoan, provided you are increasing the loan amount by at least $20,000 and up to a maximum of 80 per cent of your property’s value.

UBank’s website should allow you to easily manage and monitor your home loan online. You can, for example, monitor repayments and change the frequency and amount, download statements instantly and redraw funds yourself if you’ve made extra repayments. You can also transfer between loan splits. UBank also provides help and information over the telephone and email, so you’re not operating alone online.

Review of the lowlights

A UBank home loan can take a number of weeks to approve, so despite being an online bank, the service is not always speedy. And if you prefer to deal with people, then the UBank online application process may put you off.

Potential customers should also take into account that UBank charges a relatively high fee each time you lock in a fixed rate.  This may put off borrowers who like the insurance of fixed loans but who want to choose a term that suits their needs. Moreover, the periods available on fixed loans are limited to one, three and five years, a downside given many other lenders offer two or four-year fixed terms. Another restriction to note is that redraws aren’t available on a fixed rate UHomeLoan, though this isn’t unusual among lenders.

There are other limitations. For example, when paying interest only on a UHomeLoan, you can only make monthly repayments, rather than weekly or fortnight repayments. This is a drawback because making more regular repayments can help to reduce your interest costs. You should also note that a higher interest rate applies during the interest-only period, though this is fairly common for such loans.

The verdict after review

If you’re on a tight budget and want a low-cost home loan that will enable you to keep interest costs down, then the UBank UHomeLoan is worth reviewing. It’s a good option for those who enjoy the convenience of banking online, but always with the option of picking up the phone if you have any questions.

The online loan offer flexible features without the full bells and whistles – and cost – of home loans with full features offered by a bank with a branch network. Despite the lack of an offset account on UBank variable home loans, if you don’t have too much cash sitting around, then this won’t be a huge drawback. There are other ways you can reduce interest on your loan such as making free extra repayments as often as you can.

Weighing up the pros and cons, the UBank UHome Loan is worth considering for anyone who views their budget bottom line as a priority. You will still need to do a full review of all the pros and cons of the loans given your own financial situation but UBank home loans are definitely worth a look.

Note: This review provides general information about the above home loan. Any views expressed are the author’s own. It is not intended to be a recommendation of a particular product. To the extent that this commentary may constitute general advice, this advice is of a general nature and does not take into account your individual objectives, financial circumstances or needs. We recommend that before you make any financial decision you seek professional advice from a suitably qualified adviser and read the PDS. Read more about our important disclosures here.

About the author

Nicki Bourlioufas

Nicki Bourlioufas is a personal finance expert and freelance writer for RateCity. She has more than 20 years' experience in journalism and has previously written for News Corp, Dow Jones and Fairfax Media.


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