What Writing $170m In Home Loans Taught Me About Choosing Banks

By Adelaide FHB | Blog

Aug 14

Which Bank is Right for You?

The million dollar question!

You’ve probably heard stories from family members or friends about which banks they really like (or which ones they don’t like), which may have caused you to form an opinion one way or another about some banks.

You might also not be aware just how many different banks, building societies, credit unions, non-bank lenders and other financial institutions are available in Australia.

Most people think about the Big 4 (ANZ, Westpac, NAB and Commonwealth) without giving too much thought to some of the smaller lenders out there.

So how can you possibly know which bank is the right one for you and your financial needs?

One of the biggest takeaways I’ve learned from years of writing loans is that while one bank and their products might be ideal for your friend’s needs, the same loan might be totally unsuitable for your financial goals. The key to choosing the right bank and loan products for your own personal needs is to take a few different factors into account first.

Loan Type

Before you make a decision about which bank is best for you, take some time to determine what type of loan you need.

  • Variable rate home loans
  • Fixed rate home loans
  • Self-employed loans
  • Investment loans
  • Low Doc loans
  • Credit impaired loans
  • Business/company loans

The list can go on. Remember, the type of home loan that worked really well for your mum and dad might be unsuited for your financial needs, so it’s important to consider your own circumstances before making a decision.

Lending Policies

Every bank has their own individual lending policies and rules about lending money. Some are focused on lending money to mums and dads who want to buy a residential property to live in, while others might be happier to help self-employed borrowers or offer business financing options.

However, the offerings from the big banks can be quite conservative. In some cases, their policies for lending money can be a bit stricter than some of the smaller banks. The major banks may also have tighter rules about how much money you’re able to borrow.

That’s where considering some of the smaller lenders could benefit you. Alternative lenders may have more flexible policies when it comes to self-employed borrowers. Others may be more lenient with casual or unusual employment circumstances.

Then there are lenders known as ‘non-conforming banks’. These banks are often happy to consider loan applications that other banks will turn away.

As an example, let’s look at a self-employed person who has only been operating a business for 6 months. Most banks will not deal with someone in this situation, but some of the non-conforming banks will consider your application.

Non-conforming banks generally require fewer income verification measures to lend you money. Unfortunately, those flexible policies often come at a price. In some cases, this could be a higher interest rate or extra loan fees, but if you want to get access to funds this may be a tolerable solution.

Non-conforming lenders are also happy to consider borrowers with bad credit. If your credit score has been impacted by an event in the past, you might automatically think you can’t get a home loan. However, a non-conforming lender is often the best option to place you into a loan.

What I have tried to illustrate is that there are loan options for all different types of clients. There is no one shoe that fits all.

So it could be crazy just to consider one bank when there are so many alternatives available. Before making a decision about which bank will be right for you, take some time to speak to a good mortgage broker. They’ll help you compare the options available and make it easier for you to narrow down your options and choose the right loan for your financial needs.

Happy house hunting!

Rick Nieuwenhoven