Compare online home loans

It is possible to obtain pre-approval for a home loan online, so whether you can do it will merely come down to a question of whether your lender of choice offers it.

Pre-approval is a process in which a lender determines how much money they will be willing to lend you for a home loan purchase, after analysing your financial information, including such things as your assets, liabilities and details of your income.

Obtaining pre-approval can be helpful in the house-hunting process, as it can allow you to make an offer with a degree of confidence, knowing your price range and the amount that your lender is likely to approve you for.

It is worth remembering, however, that pre-approval – whether obtained online or through more traditional means – is not the same as final approval. Your lender will still want to undergo some steps, like obtaining a valuation of the property you wish to purchase, before giving approval.

From a consumer’s point of view, one of the appealing aspects of bigger banks and lenders may be the perception that their size makes them safer, and potentially less likely to fail. If you’re considering an online lender, you may therefore be wondering if they are as safe as bigger banks.

It’s worth noting that your online lender may actually be owned or backed by a bigger bank, in which case you will likely be offered the same protections that this institution offers its own customers. Doing some research into who the lender is backed by may offer you some peace of mind. But even if the online lender you’re considering doesn’t have the backing of a big bank, you may get reassurance from understanding how all lenders are regulated, regardless of who owns them.

Some online home lenders are also banks, meaning that they are what’s known as authorised deposit taking institutions, or ADIs. Any business with an ADI is regulated by the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC). Some online lenders are non-bank lenders, meaning they are not authorised to take deposits. These are generally not regulated by APRA but are still governed by ASIC.

Any lender who provides a credit product to consumers in Australia is required to abide by certain rules, including holding an Australian Credit Licence. Lenders are required by law to make an assessment about whether borrowers can realistically afford to repay a loan before offering credit, and are also required to make sure customers have sufficient information to make an informed decision about a loan product. In this sense, taking out a home loan with an online lender is no less risky than opting for a bricks and mortar lender.

The ASIC website has further information about the rules and regulations that govern credit providers, including big banks, smaller lenders and non-bank lenders.

In the unlikely event that your home loan lender goes out of business, then it is most likely the case that your mortgage will be sold to another lender. If your home loan is sold on in this way, then the new lender will take over managing your home loan.

It is important to be aware that if your home loan moves to a new lender, you will be required to abide by that lender’s rules, and will potentially be charged a different interest rate and fees than the lender you were with. You may decide to refinance your home loan, although doing so can come with certain costs, depending on the kind of loan you have.

If your online lender is an ADI, then your home loan may come with an offset account. Otherwise, if they do not hold a banking licence, they may still provide an offset account by teaming up with an ADI. If a home loan lender goes bust, then the federal government’s Financial Claims Scheme protects deposits of up to $250,000. It is important to understand, though, that this scheme only protects ADIs, so if you are with a non-bank lender, money you have in an offset account may not be protected in the same way in the event that they go out of business.

Cyber attacks and data breaches are an unfortunate fact of life in the modern age, so you may well be concerned as to whether online home loan lenders are vulnerable to these things. While there is no way to guarantee safety, and any bank or home loan provider may be vulnerable to some degree, it is worth doing some research to find out what protections a particular lender might offer.

You may want to check on such things as whether the lender in question offers multi-factor authentication (log-in via an SMS code sent to your phone), what their password requirements are, and what internal policies they have in place for collecting and handling customer data, including whether they use secure online portals or email for important documents.

If you would like to know more, Australia’s eSafety Commissioner has a list of other safety considerations when it comes to online banking.

When it comes to online home loans, potential advantages can include such things as lower interest rates and fees, and the convenience of running your home loan from your smartphone or laptop.

Convenience: If you prefer to run your finances from a smartphone or laptop, applying for a home loan online might be appealing. Online home loans aim to offer the ease and convenience of not having to deal with paperwork or visiting branches.

Potential for lower rates and fees: When it comes to taking a home loan from a digital bank, it may have less infrastructure costs than those with a bricks and mortar presence and so may also have lower operating costs. It may then be able to pass any savings on to the consumer in the form of lower interest rates than a traditional lender could offer. There is no guarantee of this, however, so it’s wise to compare costs from a variety of lenders. The home loan market is a competitive place, so it’s a good idea to compare your options before you commit to a loan. You can use the table at the top of this page and change the filters to suit your requirements.

Some potential downsides of online home loan revolve around the application process, and, for some digital lenders, also include potentially having access to fewer features on your home loan. The lack of infrastructure may mean that you may get a less personalised experience if you do business with them.

Need for digital documents: When applying for a loan online, you need to have digital versions of your documents, and they may need to be in a specific format or size. If you are not familiar with how to do this, it may present a point of frustration.

Lack of features: Some lenders offer home loans that come packaged with a variety of features and other products. These can include savings accounts, personal loans, credit cards, or other financial and insurance products. You may find that a digital-only lender has a more streamlined offering, and indeed, if they are not an ADI, they may not be able to offer such things as offset accounts.

If you want the convenience of these added features to be able to do more of your day-to-day financial business in one place, an online lender may not be suitable. On the flip side, getting your financial products from different providers, while potentially less convenient, could work out cheaper overall if you can find good deals in different places.

Potential lack of infrastructure of some digital lenders: While a lack of infrastructure like branches, mobile lenders and even potentially call centres can mean that online home loan lenders have lower operating costs, the absence of a human across a desk or on the other end of a phone can be frustrating, especially if you need urgent help and want to reach out to a person.

If your lender operates solely online and only communicates via email or their app, you may feel like you are not getting the service you need.