The internet has transformed our shopping habits. After more than a decade of consistent growth, online sales in Australia total over $24 billion annually.
Shopping over the internet does have its upsides. It’s convenient, offers extensive choice, and online retailers can often pass offer valuable savings through lower prices.
Given the way we’ve embraced online shopping, it’s surprising to learn that Australians tend to shy away from online mortgage lenders.
A survey by comparison site Mozo found 62% of Australians aren’t comfortable buying a home loan online simply because they didn’t know enough about online lenders.
The thing is, online lenders can offer the same advantages of convenience and choice as online shopping. And without the costs of an extensive branch network, online lenders can afford to offer very competitive mortgage interest rates.
In fact, when it comes to a typical home loan of $350,000 repaid over 25 years, Mozo found online lenders are, on average, 0.52% cheaper than the big banks. The interest savings can be impressive – potentially adding up to around $2,256 annually on some of the cheapest online loans compared to some of the higher rate products. This can mean pocketing total savings of more than $56,000 in interest charges over the entire loan term.
A quick look at several comparison sites confirms that online lenders are offering attractive rates. Among the frontrunners is loans.com.au with a variable comparison rate of 4.56% for a $350,000 loan, and UBank with a comparison rate of 4.62%.
Despite the pluses, online lenders may not suit everyone. Arranging a loan over the internet tends to work best for borrowers whose circumstances are fairly typical of the average home buyer. That generally means being an employee with a regular pay cheque looking to purchase a suburban home.
If you are self-employed, have trouble proving income, or your circumstances are out of the ordinary, it can work in your favour to head to your nearest bank branch or a reputable mortgage broker, and explain the situation in person.
Bear in mind too that while the rate you pay matters, it’s not the only factor to consider when selecting a home loan. The availability of flexible loan features like redraw and fee-free additional payments is important too as these can help you pay off the loan sooner. Ultimately this could be the thing that provides genuine long term savings on interest.