Looking to take out your home loan with an online lender? The past decade has seen many financiers muscle in on the home loan market, challenging the big banks with hundreds of highly competitive and innovative home loan products.
You can find and compare a range of the top online home loan offers right here with Savvy. Find out all you need to know about how to apply for your mortgage online and how to successfully compare loans to find the one that’s just right for you.
How do online lenders work?
Online home loans are offered by lenders who usually don’t have physical bricks and mortar branches and who do not employ staff to meet with borrowers in person. However, in almost every way, online home loans are just like any other home loans in the way they function: you apply to a lender for a loan to help you pay for your property, which you’ll receive as a lump sum and gradually repay over a set term, typically 25 to 30 years.
As the market for online home loans continues to expand, more and more online lenders are differentiating themselves by creating innovative and flexible products and services which go above and beyond what the big banks can offer. Most notably, online home loan lenders use a speedy paperless approach to home loan approval and are known for their customer-friendly approach and prompt response times.
What are the advantages of online home loans compared to other options?
Lower rates and fees
With no expensive branches to maintain, online lenders can offer loans with low interest rates and low, or sometimes even no, account keeping and administration fees. Securing even a slightly lower interest rate can save you thousands of dollars over the life of your mortgage, so it’s important to take advantage of these offers where you can.
Simple, easy application
Applying online for a home loan has become increasingly popular in Australia because it’s never been easier. You can apply for your loan from the comfort of your own home at a time suitable for you, submitting digital copies of necessary documents and avoiding reams of messy paperwork. Most lenders have online chat facilities to assist you with your application and user-friendly loan apps which make applying a breeze.
Online home loan lenders invest heavily in the latest cutting-edge technology, so they are always finding new innovative ways to make the loan application process faster and more convenient. They will often get back to you with loan approval within a few days, and it’s even possible to get pre-approval on the same day you apply.
Are online lenders safe?
Yes – online lenders are safe to work with when it comes to securing your home loan. Some of the reasons why they’re so safe include:
Australian financial institutions are subject to stringent regulation. Most online lenders are governed by the Australian Prudential Regulation Authority (APRA), but if not, they still have to adhere to guidelines regulated by the Australian Securities and Investments Commission (ASIC).
They have secure apps and portals
Offering loans is how online lenders make their money, which is why they invest heavily in app development and internet security. Providing your details to an online lender is just the same as sharing information with a big bank. All Australian online lenders have to adhere to strict Australian privacy principles, so you can be assured sending sensitive, confidential information to your online lender is safe.
They have to be licenced
Check your lender has an Australian Credit Licence (ACL), which should be displayed on their website. You can double-check this licence number on ASIC’s credit licence register. All lenders that Savvy partners with are licenced and safe, however, so you won’t need to worry when you compare with us.
They have big backing
As many online lenders are either backed by or owned by larger banks, superfunds or established independent financiers, in the highly unlikely event that an online lender closes down, your loan will almost certainly be bought by another financial institution. The only change you would notice is the name of the company contacting you about your loan.
How do I compare online home loans?
Look at the comparison rate
Naturally, you’ll want to secure the lowest possible interest rate, but make sure you check the loan’s comparison rate also. This takes into consideration all the fees that may be associated with the loan. All lenders offering loan products are obligated by Australian legislation to show a loan’s comparison rate so consumers can compare offers based on a more accurate reflection of their cost.
Choose your loan type
You can opt for either a variable interest rate, or a fixed interest rate loan, or a combination of both, which is known as a split rate loan. Repayments on a variable interest rate loan will fluctuate as interest rates change, but such loans tend to offer you the greatest flexibility and range of features. Fixed rate loans allow you to budget more accurately, knowing your repayments won’t change for the duration of the fixed term.
Many lenders allow you to combine the best of both of these types in a split loan and offer you the choice of how you split your loan, such as 60% with a fixed interest rate for a set period and 40% of your loan with a variable interest rate.
Choose your additional features
Next, think about any additional loan features you may want on your variable rate loan to reduce the amount of interest you have to pay. Offset accounts save you interest by reducing the principal amount you’re charged interest on. You may want the ability to make additional repayments to pay off your loan sooner, or have a redraw facility to assist you in case life throws you a curveball.
Consider loan-to-value ratio (LVR) requirements
Most lenders require you to supply 20% of the value of the property you wish to buy as a deposit. This is called an 80% LVR loan, as the lender provides 80% of the total loan value. However, some lenders are prepared to loan 90% or even 95% LVR if the borrower is prepared to pay lenders’ mortgage insurance (LMI), which is an insurance premium the borrower pays to protect the lender if the borrower is unable to make loan repayments, or provide a guarantor.
Choose your lender and loan
Once you understand how much you want to borrow, what type of loan you want, which loan features you want and the term of your loan, use Savvy’s loan comparison table to compare loans side by side and find the one that’s just right for you.
Your home loan options
Making your first big step towards buying a home? It's crucial to be across your mortgage options as a first homebuyer.
Opting for a variable interest rate on your home loan means it'll fluctuate as the market moves throughout your repayment term.
On the other hand, fixing your rate locks it in for a pre-defined period. This can bring with it greater certainty around your budget.
It's important not to set and forget when it comes to your home loan. If you find a more competitive offer, it may be worth refinancing.
If you're looking to build a new house, construction loans are specifically designed to cater to the different needs associated with doing so.
A guarantor essentially acts as a safety net for your lender, as they sign onto your loan to agree to pay it off should you become unable to do so.
Purchasing a property as an investment brings with it different specifications from a lender. It's crucial to know what your options are.
Businesses big or small may wish to purchase a property for commercial purposes, which are also different from a standard loan.
Your home loan may give you an interest-only option, which allows you to exclusively pay interest on your loan for a set period.
Just because your finances may be slightly more complicated as a self-employed individual doesn't mean you can't take out a home loan.
Some lenders may allow you to apply for a home loan with alternative documents, such as tax returns, BAS and ABN registration.
Why compare home loans with Savvy?
What's the process for an online home loan application?
Apply either for conditional or full approval
When you apply online either for pre-approval or full loan approval, you’ll need to supply a variety of information to the lender so a decision can be made about whether to accept or reject your loan application.
Make sure you’ve worked out how much you can afford to borrow, the size of deposit you’re contributing and what type of loan you want to apply for. Allow yourself at least 20 to 30 minutes to complete your application, and make sure you supply all requested documentation. Take care with your application to avoid any mistakes which may delay the process.