So you’re thinking about buying your first property or upsizing and you need to borrow money. Your first thought (as mine was) is to go to your bank and ask them; however there are so many lenders out there, including non-bank lenders, it’s important to consider them all. Both banks and non-bank lenders have pros and cons but how do you which is the right one for you?
I can tell you from experience that choosing the right mortgage can sometimes be an overwhelming experience. There are so many lenders out there competing against each other and offering different product features, so finding the right one can be a challenging task!
The most important aspect when looking for the right loan is to look at all of the different features on offer. Once you have made a list of these, stop and think about their relative importance to you and your financial position. Next, start to rank the features in order of importance. Once complete, you will have a great checklist against which you can measure all of the different mortgages.
But before you make any hasty decisions here at HomeSource we offer a specialised lawyer service which is very affordable and you can ask any questions about the buying process. We also work with accredited financial planners who can offer you their expertise.
So firstly, who are non-bank lenders and what can they offer me? Well they are basically what they say on the tin. They’re not a bank, a building society or a credit union as they don’t hold a banking licence.
Are non-bank lenders trustworthy? Some people may err on the side of caution with non-bank lenders; however both banks and non-bank lenders have to abide by the same laws, rules and regulations, such as the Consumer Credit Code which governs all credit transactions in Australia. And the Australian Securities and Investments Commission which requires lenders to be transparent with fees, rates, and that the required information is made readily available to you.
What benefits will I get by opting for a non-bank lender?
- They offer very competitive rates and can often be a cheaper option.
- They often have a less stringent lending criteria so it’s a good option if your credit rating is on the low side or you have be declined a loan by a bank in the past.
- They tend to have low set up and ongoing costs.
- They are often more flexible in meeting your specific needs and requirements.
- They offer a more personalised customer service and a greater range of niche loan products to suit your individual circumstances.
However with pros there are always disadvantages. Non-bank lenders can be more vulnerable to economic conditions. When the Global Finical Crisis hit a number of lenders withdrew from the market. In addition, they tend to have a limited product / service offer that may not suit you and your needs.
What benefits will I get by opting for a bank lender?
- Banks are generally more established institutions and hold the majority of the market when it comes to mortgages. 50% of mortgages are held with the CBA and Westpac.
- Ease of access. For some of you, you may find it easier to stick with the same bank that you manage all your finances through. However you should research the market as you may find a much better deal elsewhere which could save you thousands in the long run.
- Banks have an extra level of regulation under the Australian Prudential Regulatory Authority (APRA) who ensure that, under all reasonable circumstances, financial promises are made by institutions.
There are of course disadvantages with bank lenders too. They are such big institutions where the service can be a lot slower and less personable. They also can’t offer some of the more tailored loan options that non-bank lenders can offer. And overheads can often be more expensive too; these costs are often reflected in their fees.
So now you’re armed with all the facts you should be well on your way to finding the very best deal out there! Remember with any big decision in life, it’s important to do your homework and speak to the right people who can help you and offer you valued advice.
It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan