Online home loans

An online home loan is a standard home loan that can be applied for, opened and managed entirely online through a lender’s website or mobile app. You can compare loans, submit an application and upload your supporting documentation digitally, without needing to visit a bank branch.

Several banks and lenders in Australia offer online home loans, including some which operate entirely online. While most lenders offering online home loans will generally let you speak to one of their specialists over the phone, the actual application and processing of the new home loan is almost exclusively completed online.

Online home loans cover most everyday borrowing needs and can be used to buy a home to live in, refinance an existing loan or fund an investment property. Some of the common home loan options available online include:

• Owner-occupier and investment loans
• Variable-rate home loans and fixed-rate home loans
• Loans with different repayment types, like principal & interest (P&I) or interest-only (IO) repayments
• Loans with offset accounts, redraw facilities, and the ability to make extra repayments.

However, the mix of products may vary, with some online-only lenders limiting their offerings to ‘vanilla’ or straightforward home loans, or loans with an LVR of 80% or less. This may not suit borrowers with more complex financial needs.

Online mortgages are generally different from traditional home loans in the way they’re applied for, assessed and managed. The process is usually more digital, with app-based or web-based applications, electronic ID checks and online document uploads. Some online lenders may also offer lower rates or fewer fees, partly because they tend to have lower operating costs, but they may offer less in-person support than branch-based lenders.

Apart from the service model, the loan itself works much the same way as any other home loan. You’ll still need to meet the lender’s eligibility criteria, make your repayments on time and pay any applicable fees.

An online home loan could suit you if you’re comfortable managing your application and loan online, and don’t need branch access. It may be less suitable if you prefer face-to-face support or if your circumstances are more complex, such as being self-employed, having a low credit score or applying with a small deposit.

It’s also worth knowing that some lenders offering online home loans operate as digital-only businesses. This can mean they offer fewer banking products or services beyond the home loan itself, such as deposit accounts or credit cards, particularly if they are not an authorised deposit-taking institution (ADI).

Yes, online home loans are generally safe in Australia, provided the lender is properly licensed and regulated. Many of these lenders are owned or funded by bigger banks or institutions that carry an authorised deposit-taking institution (ADI) licence, which guarantees up to $250,000 of your money if a bank collapses.

Smaller lenders that aren’t ADIs still need to comply with Australia’s credit laws, hold an Australian credit licence or act as an authorised representative, and follow ASIC regulations, even if they don’t have a physical branch presence.

One of the primary benefits of online home loans is the potentially lower interest rates they can offer. Thanks to their relative lack of overheads (e.g. rent on a retail space, branch staff salaries), these lenders are better positioned to offer lower interest rates than their more traditional, bricks-and-mortar competitors. These lower interest rates can mean lower monthly repayments, which may help you make extra repayments over time and potentially pay off your home loan sooner.

Of course, there’s no guarantee that any given online lender will offer lower interest rates. Still, by thoroughly comparing home loans from online and bricks-and-mortar lenders, you’ll be able to make a more informed decision. Whether you want a fixed or a variable interest rate, comparing your options is particularly crucial if you’re aiming to secure a low rate.

Another potential benefit of choosing an online lender is lower fees. Online lenders may have lower fees for the same reasons they have lower interest rates – reduced operating costs allow them to pass savings on to borrowers.

This can result in lower upfront costs (e.g. application fees and valuation costs) as well as lower ongoing fees (e.g. loan account maintenance).

However, lower fees aren’t guaranteed, so it’s important to compare loan costs and determine for yourself how online home loans stack up against the competition in the context of your financial circumstances.

Because they operate 100% online (and often use innovative processes and technologies not utilised by traditional lenders), many online lenders can potentially process home loan applications faster, whether it’s for first home buyers, an investment property, or refinancing an existing loan.

Applications can be completed entirely online, with pre-approval in hours or even minutes.

You can also manage your home loan from wherever you are, as long as you have an internet connection. This can be especially helpful if you live in a remote area, as there’s no need to travel to a bank branch for customer support.

However, you should still keep in mind that home loan pre-approval and final approval are different to settlement, which is the official transfer of the property into your name. Going from an initial home loan pre-approval to the final settlement can still potentially take weeks, even with the speediest of digital lenders.

A major drawback to online home loans is how narrow their scope can be when it comes to who they suit, and they might not have the resources to offer a full suite of home loans. Each lender has its own eligibility criteria for determining whether to approve new customers for a loan. This can include:

• Certain household income thresholds.
• Location restrictions – some postcodes or areas (such as rural or regional locations) may be excluded or face stricter lending criteria, as they’re generally perceived to make for riskier lending due to lower demand and potential valuation challenges
• Specific property type or value limits, such as restrictions on commercial properties or student accommodation.
• Limited loan terms or loan amounts (for example, only offering a 30-‑year loan term)

So while that ultra-low interest rate might look appealing, be sure to check with the online lender first to see whether they’re likely to approve your application based on your circumstances.

One drawback of being a leaner and meaner lending machine is that the average digital lender might not have the resources to offer a full suite of home loans. Conversely, the bigger banks have hundreds, if not thousands, of staff along with the resources required to develop a wide range of products and bring them to market.

While you could easily find owner-occupier, investment and refinancing home loans on offer from digital lenders, they’re less likely to offer other loan types, such as construction loans, line of credit loans or debt consolidation loans. Contract workers and self-employed individuals may also have a harder time getting a home loan online.

Physical, in-person banking is still a valuable option for many people. However, the lack of physical branches means face-to-face customer service isn’t available with such loans. This can be a drawback for borrowers who aren’t tech-savvy or who prefer speaking with a specialist face to face – especially when dealing with something as important and complex as a home loan.

So if in-person banking support matters to you, an online home loan may not be the right fit.