Lender options beyond the “Big four”

It can be an overwhelming decision because comparing home loan products is difficult. There are a large range of features that vary significantly across home loan products and comparing these features is like comparing apples with snowmen.

As a starting point though, it might be helpful to know a few ways that the big four banks differ from smaller lenders, and how to investigate which lender is right for you.

The comparison rate is the rate that is actually applied, net of fees and other charges. The advertised rate is often a lower, headline-grabbing number that doesn’t take into account the additional costs that you’ll be charged.

When choosing between one of the big four banks or a smaller institution, it is helpful to remember that the big four all answer to shareholders and have significant overhead costs, which contribute to the markup on their financial products.

Smaller institutions don’t face the same significant expense sheet when turning a profit, so have a natural advantage in many ways when it comes to interest rates.

However, smaller lenders are accustomed to competing on these issues and can potentially offer some very creative solutions to help you with your goals. If all other areas of research are leading you towards the smaller banks, then make sure you talk to them about features that are important to you.

Credit cards, fixed vs variable, additional repayments are all areas where the big four can find good points of difference to smaller lenders so make sure you really understand what features you will need and use.

Today, customers have a choice about the type of service they would like and for some, the personal touch doesn’t appeal. So, an online-only service, using an app to do all their banking, with the backup of a call centre, is more than enough. If this is you, then there are myriad smaller institutions that will suit your needs.

If you’re looking for a place with lots of convenient branches, then the big four might be a good starting point (although these continue to diminish rapidly).

If a more personal and tailored experience is important to you, then a smaller institution, such as a credit union or building society could be the best option.

The big four banks have very efficient processes in place that can move standard approvals through very quickly. However, if there’s something non-standard about your application – such as perhaps being a self-employed person or buying with a higher debt-to-income ratio, then it may take longer to hear confirmation from the bank.

Smaller institutions tend to be a little faster because there are much smaller volumes of loans to approve.

A range of banks – big & small –  use technology and other means to try and “fast-track” their approval process as this is certainly a key differentiating feature. Others have a “hands on” approach where a full assessment may suit a client so they have more certainty with the loan application outcome.

So, be prepared to compare. This is the place where mortgage brokers flourish. Our ability to cut through and layout the options across multiple lenders can see you benefit mightily from competition in the lending space.

This approach was vindicated when we were named Victoria’s Best Finance Broker at the 2017 Better Business Awards.

So if you’re considering investing in, or developing, property, why not contact Intuitive Finance’s mortgage brokers today to ensure you have the right information and expert support on your side no matter what stage of the property ownership journey you are on.