Finding the house you want to buy is often the easy part.
Deciding where to acquire the money to pay for it can be the real minefield. Should you go with one of the big banks, or is a smaller lender a better bet?
After all, the right choice of lender could save you tens or even hundreds of thousands of dollars over the life of your loan, or perhaps just as importantly, save you hundreds of hours of stress if you choose one that offers excellent service.
There are many factors that can come into play when deciding where to source your home loan. And you should always seek professional advice before choosing any financial product.
But before you do, here are just a few of the factors it can pay to consider.
For many borrowers, their number one consideration is what their final interest rate and repayments will be.
Market Street Finance director Jonathan Kline-Spink says that while price shouldn’t be the most important factor for borrowers, in the end money talks.
And if price is your guide, often the smaller lenders are a little sharper.
“As a general rule, smaller lenders offer lower interest rates than the Big Four banks. They’re generally cheaper,” Kline-Spink says.
“They don’t have a branch network, so their overheads and running costs are generally lower and this allows them to pass some of those savings to the consumer.”
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Kline-Spink says that if you’re in a rush, the Big Four banks (that’s Westpac, Commonwealth Bank, ANZ and NAB) can generally push your loan application through faster than the smaller operators.
“I generally find that bigger banks have faster processing approval time. If you’re looking for a loan and time is of the essence, generally the bigger banks are quicker,” he says.
While we’d all like a gleaming credit record and a big pile of savings, they’re not always possible for everyone.
In those scenarios, Kline-Spink says smaller lenders will often be more prepared to work with you and offer better flexibility with their credit policies.
“If you’re credit impaired or if you don’t have genuine savings and things like that, those are niches that smaller lenders picked up to be a point of difference to the bigger banks,” he says.
That said, for self-employed people whose income may fluctuate throughout the year, Kline-Spink says the Big Four will often provide more flexible options.
Ease of access
While we’re moving faster every day into an online world, sometimes you just need to speak to someone face to face, or drop off some paperwork in person.
And for that, the larger banks win out almost every time, because they’ve got more bricks and mortar branches across Australia.
Kline-Spink says that while smaller lenders often offer more personalised customer service overall, having a branch you can quickly access when required can be important.
“Bigger banks have a full branch network, which shouldn’t be discounted. That makes it really easy to walk in if you need a bank check, or you need to change your credit card, open a new account or anything like that. It really is just walk in and get it sorted,” he says.
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