Online mortgages guide
In recent years taking out a home loan online has become increasingly popular, cutting out the middle man and aiming to simplify a sometimes complicated procedure. Online mortgages can seem attractive, often featuring lower interest rates and concessions on other fees, however it is important to consider your options carefully before making a decision.
Many people still trust a mortgage broker or a lending manager from the bank to advise and help them in deciding which mortgage is best for them. But with so much financial information now online, many people feel confident in their ability to research and compare home loans themselves.
What is an online mortgage and how does it work?
Firstly, it's important to understand that online mortgages will require you to do some more research on your own. When applying for a standard home loan through a bank or other financial institution, you are generally led, step-by-step through the application procedure. All required paperwork is checked meticulously and you are constantly advised about everything that could impact upon your decision - possibly the biggest financial decision of your life.
A good mortgage broker or lender will explain all the relevant products, including fees, charges, terms and conditions, and you will be given advice regarding which loan is right for you.
Online mortgages require you to do all this research yourself, before applying using a web-based application form.
The application procedure
Although a number of the current online mortgage lenders are affiliated with a particular financial institution (eg UBank is backed by NAB), it is still a requirement that borrowers satisfy a standard 100-point identity check, regardless of whether they are already customers of the bank.
Next, certain papers must be seen by the lender before the application can proceed. These will include recent payslips, proof of a recent savings history, details of other loans or debts you may have, recent tax assessment notices and other relevant financial information. You may also need a letter from your employer providing your employment history.
Following this, a valuation of the property will be required. Your lender will supply their own valuation, either by using specialised computer software or by employing a valuer to visit the property. Other paperwork pertinent to the property may also be required, such as certificate to occupy and building and pest inspection documentation.
The application form itself is a detailed online form which is one reason online mortgages are not recommended for the first time mortgagee. If you make a mistake or do not have the required documentation it can turn out to be a costly exercise, especially if you miss the settlement date on your dream home.
Who are online mortgages for?
As mentioned, online mortgages are not for the novice, or first home buyer. Many online mortgage lenders only allow refinancing of an existing home loan. People with previous experience in applying for a home loan, and currently paying a higher interest rate, are the most likely to benefit. If in doubt, make sure you can ask questions from an expert. Online mortgage providers do have telephone hotlines so make sure you take advantage of this service before you sign.
Where can I get an online mortgage?
There are several main lenders offering online mortgages in Australia. There has been some contraction in the online mortgage lender space in recent years. HomePath by Commonwealth Bank was taken back in-house. One Direct by the ANZ Bank was discontinued in 2009 and Wizard Home Loans was bought by Aussie Home Loans also in 2009. Virgin Money also no longer offers their own home loan product.
UBank is backed by NAB and offers a very competitive variable interest rates with no application or monthly fees. There is no offset account available with this online loan, but redraw facility is available.
- ING DIRECT
ING DIRECT offers several different packages for competitive online mortgage rates. You can choose between a variable home loan rate or a fixed rate for up to 5 years.