What you need to know when getting an online home loan: ME Bank
Online home loans are offered by banks and lenders that do not have branch access or employ staff to meet with customers in person.
More often than not, the trade-off is getting cheaper interest rates and paying lower ongoing fees.
While most banks and lenders are governed by the Australian Prudential Regulation Authority (APRA), some online lenders are not governed by the APRA.
Nonetheless, all online lenders must adhere to a set of guidelines by the Australian Securities and Investments Commission (ASIC) which means, though you won't have any in-person banking service, you will still have consumer protection rights which includes the right to make a complaint through the Australian Financial Complaints Authority (AFCA)
There are a growing number of online lenders in the Australian market, the main ones being Click Loans (3.76 per cent comparison rate per annum), ME Bank (3.44 per cent), State Custodians (2.85 per cent), UBank (2.84 per cent), Tic:Toc (2.8 per cent) Australian Mortage Marketplace (AMM), and loans.com.au (2.8 per cent) to name a few.
Like most home loans, online home loans require applicants to submit paperwork proving their eligibility for a loan.
At ME Bank for instance, the below are required:
1. Proof of Identity
Not being able to meet and greet you in person means that online lenders will need proof that who they're lending to is you.
Applicants will need at least 100 points of ID upon application.
ME Bank recommends, "A passport is a good start, plus a combination of your driver's licence, bank cards, Medicare card or birth certificate."
2. Paperwork
Not everything online is more convenient, and the paperwork required for an online home loan is a prime example.
ME Bank required its applicants to have:
- At least three consecutive payslips;
- A copy of your latest PAYG Summary or Notice of Assessment from the ATO;
- Any bank statements showing other income, like Centrelink payments;
- Your accountant's details, if you're self-employed; and
- Evidence you've saved for a deposit.
In addition, paperwork regarding your financial position is needed because being eligible for a home loan is not solely based on how much one earns.
This set of paperwork is necessary in assuring lenders that you can afford to repay your loan. Therefore, ME Bank also requires:
- Any other loans or debts you have, like car finance or personal loans;
- Assets in your name; and
- An estimate of your living expenses.
Most lenders will also require you to have a clean credit report prior to approving your finance, so a copy of your cred report will also be important.
Last but not least, the final piece of paperwork is a statement from you about the security for your loan, which in laymen terms means the home you are applying a loan for.
You will be required to supply details in writing of the property, and include the signed contract of sale.
If you're building, you'll need a council permit and your fixed-price builders contract.
Like most of the prior procedures, this is to assure lenders of where the money is going, and whether it is a secure investment.
3. A Solicitor or Conveyancer
Last but not least, towards the end of the application, you will be asked to provide details of your solicitor or conveyancer.
ME Bank explains, "Having your legal professional lined up before you're ready to apply for a loan will speed up the paperwork."
ME Bank is an online bank founded in 1994, and is owned by a group of approximately 30 Industry Super Funds.
Around 5,000 of Australia's 11,000 mortgage brokers are accredited with ME Bank, so it is crucial that you ask your mortgage broker if they offer ME's home loans.
Online home loans also have a selection to choose from, so it is recommended that aspiring borrowers shop around to see which is most suitable.
State Custodians for instance offer the below:
- Low Rate Home Loan;
- Investment Home Loan;
- Fixed Rate Home Loan;
- Interest Only Home Loan; and
- Low Rate Line of Credit