5 Different Types of Mortgage Lenders

Check out some of your lending options and see which among these can provide you with the best deal when it comes to home loans.

It goes without saying that buying a property costs a considerable amount of money. In Sydney, for example, the cost of a three to four bedroom property costs over $650,000 on average. Meanwhile, properties in Melbourne have an average price of about $530,000. These are such large figures that it can be quite difficult to wrap one's head around it.

Then there is also the term of the loan. On average, home loans range from 20-30 years, which although gives you enough time to repay your loan, also feels like an eternity.

Because of the cost of purchasing a home and the time it takes to repay it, you need to find a lender that could provide you with a great deal on both. In that case, you could get help from the various lending institutions in the country. These will provide you with the much-needed funds so you can have your own home. And that is what this article is all about. We will share with you some of your lending options in the following paragraphs, so you can see for yourself which among these can provide you with the best deal when it comes to home loans. Here they are:

  1. Banks. When you talk about taking out loans in general, chances are that the first thing that will come to your mind is a bank. The reason for this is that you likely have a bank account already, and they have probably contacted you in the past regarding their loan products. So when you are planning taking out a home loan, your local bank is usually on top of your list of considerations. But do not close a deal with them yet. We will explain more later in this article.
  2. Credit unions. If you work in an office or are a part of a religious organisation, you will probably come in contact with a credit union. This is a non-profit organisation that provides you with a number of banking facilities, which include deposits and home loans. If you are looking for a lending institution that provides great rates, credit unions can usually give you one.
  3. Mortgage managers. These people help arrange the funds for your home loan. They will also assist you with the entire process of taking out one, which include the application process, the assessment, monitoring your repayments, and interest rate adjustments. Unlike banks which get funds from depositors, mortgage managers get theirs from super funds, unit trusts, and even banks. They are also different from banks and credit unions in that they are not the owners for the mortgage themselves, but the entities that provided them with the money. Their role, as their name would suggest, is only to manage the mortgage. Your relationship with a mortgage manager lasts until you have fully repaid your loan.
  4. Building societies. These are pretty much similar to credit unions, although building societies are more concentrated around rural and regional areas while the latter have a nationwide scope. Like credit unions, they put a premium on the welfare of each member over profit-making, so you may be able to get a good deal from building societies.
  5. Mortgage brokers. In a way, mortgage brokers are similar to mortgage managers in that they help you secure funds from lending institutions. Brokers do not own the loan themselves, but only provide you with lending options from around 30 lenders.

The advantage of working with a mortgage broker is that unlike the other lending options we have discussed so far, only brokers can provide you with a plethora of options. And this is what you want to have if you are looking for a loan that perfectly suits your needs. In contrast, your bank can provide you with only very limited options, which is the same with credit unions and building societies.

Compared to mortgage managers, brokers usually will not charge you anything for their services. Rather, they get their money from commissions when they successfully refer someone to a lender.

Not All Lenders are Created Equal

It is good to know that you have at least 5 options if you want to take out a home loan. But as we already said, only one of these can provide you with even more options to choose from. Although mortgage brokers do not provide you with the loan themselves, they could, however, help you find that one lender that can give you with exactly the kind of loan you are looking for. Your other lending options cannot do this.

Now if you are ready to take out a home loan, you also need to remember two other important things: request for a home loan fact sheet and compare loans using comparison rates. Let us talk about the home loan fact sheet first.

When talking to a lending institution, you could request from them a home loan fact sheet. This outlines all the important details of the loan, including the loan amount, term and the type of interest. It is also written in a standard format so you can easily compare their fact sheet with those of other lenders. This is important because it makes it easier for you to compare loans. Again, do not forget to ask for this when you book an appointment with a lender.

Speaking of comparing loans, you need to remember to compare them using comparison rates. Unlike the interest rate, the comparison rate is a more accurate gauge of a mortgage because it already takes into account the interest, term of the loan, and the fees and charges. So when you are going to compare loans, you can use the comparison rate tool found on this page. All you need to do is enter all the necessary details on the form, and then click on the 'Compare' button. From there, we will take you to a page that shows you comparison rates of over 30 lenders across Australia. Try it out today!

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Published on August 8-th, 2013 in Home Loans
Damon Rasheed is the CEO of Rate Detective, an Australian financial service comparison sites specialising in Life Insurance, Income Protection Insurance and home loans. Damon holds a Master's Degree in Economics from the University of Melbourne and has been involved in many start-up internet businesses.
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