Online Home Loans & Online Home Loan Lenders

What is an online lender?

Online lenders issue home loans to borrowers using a secure website as the major source of communication. Most online banks will have strong call centre support and state of the art online banking facility to make up for the lack of face-to-face communication. These lenders don't have branches. What they lack in face-to-face communication, they often make up for in cost savings, which can be passed on to borrowers in the form of cheaper loans.

Note that some of the loans displayed on this page are online home loans, but do not come from online-only lenders. These particular home loans are instead, online-exclusive loans offered by regular banks.

Are online lenders safe? What happens to my property and mortgage if an online lender goes bankrupt?

This is a common question. People want to address the uncertainty of dealing with smaller, lesser known lenders — which is entirely understandable. It is far less of an issue dealing with a bankrupt organisation who has lent you money as opposed to getting your money off a bankrupt business you've invested in.

The most likely result is that the 'books' (the loans of the company) will be sold off to another existing lender and the loan will continue much as it did before

Phil Naylor, former CEO of the Mortgage & Finance Association of Australia.

If you consider the example of the Commonwealth Bank's buyout of Bankwest years back. It's exactly the same as if an online lender was bought by another institution.

If you are concerned about the safety of an online lender, you should check that they have a Australian Credit Licence (ACL). Lenders should list their ACL number at the bottom of their webpage. This number can be cross-referenced with ASIC Connect's Credit Licensee (who are licenced themselves) and Credit Representative (who are allowed to operate under a licensee's licence) databases.

Lenders legally need to have an ACL and consumers have access to greater legal remedies in disputes when they have borrowed money from a business with an ACL.

What protection do I have as a borrower?

There are a number of regulations in place to protect the borrower. The Consumer Credit Code looks after all credit transactions in Australia. The code states that all lending institutions, including mortgage brokers, must tell you what your rights are and obligations to any credit arrangement.

Credit providers are required to truthfully disclose all relevant information about your contract including interest rates, commissions, fees and any other information you request. All banks are also regulated by the Australian Prudential Regulation Authority (APRA) to ensure financial promises are made by institutions they supervise.

If you feel as though your service or product was not up to scratch and would like to submit a complaint, you can submit an internal complaint through the institution's internal resolution process. If you're unhappy with the resolution, you can submit a dispute with the Financial Ombudsman Service (FOS) or the Credit and Investments Ombudsman (CIO).

Why should I choose an online home loan or lender over a big bank?

There many reasons why you may want to consider choosing an online lender over a bricks and mortar lender.

Here are some reasons why you might choose to go for an online lender:

Would there be any situations when I shouldn't use an online lender?

Regional property

Borrowers in regional areas may have to consider a regular lender as some of the smaller online lenders aren't able to lend money for properties in regional areas. In the mortgage world, rural areas are regarded as riskier security, and many online lenders don't have the size nor expertise to handle these types of loans. When purchasing a rural property, it is worth asking around for the lenders that permit home loans for regional areas.

You're not tech-savvy

If you're uncomfortable with using the Internet for your banking, or you'd prefer face-to-face communication with your lender, then an online lender would not be able to meet your needs. All, if not, the majority of transactions that you conduct will be online.

Why choose an online lender over a mortgage broker?

Firstly, to touch on the basics, an online lender is a provider of loans. The online lender will fund these loans themselves. A mortgage broker is essentially a middle person who helps a borrower choose and apply for a loan from the broker's list of lenders. Mortgage brokers don't fund the loans themselves, but use products from various external lenders. They are usually paid by commissions on the loan from the lenders.

The choice between a broker and online lender is really a matter of preference. If a customer doesn't want to do the searching and researching of loan products online before they commit to a mortgage, then one option for them is to go to a mortgage broker, who can guide them through the process and conduct some of the process for them and some of the process with them.

Another service aspect of mortgage brokers is that they are able to access wholesale rates and deals which may be unavailable to the direct retail market.

Both mortgage brokers and online lenders can assist borrowers in applying for loans, and first home buyer grants and can be a very useful guide to a buyer to help them decide which of the many various types of loans should be chosen for their particular situation.

Click here to learn more about mortgage brokers and if a mortgage broker is right for you.

Frequently asked questions about online home loans