Hi all,
I am looking at interest rates these days as I want to buy my first home (to occupy).
Some lenders such as aussie, mortgage house, loans.com.au, etc… claim they are the cheapest on the market.
Does anyone have experience dealing with those guys ?
Are they really as cheap as they pretend to be ? or is it full of hidden fees ?
What are the drawbacks associated with these lenders deals, compared with big names like CAN, NAB, hsbc etc… ?
Are they more affected by economic conditions ? say, if the economy changes and lenders globally raise their rates, these small lenders would raise more than big banks…
I mean if these small companies had such great deals, big banks would do no business, and considering a consequent part of their income is about buying debts from home owners, all these big banks would go bankrupt.
To an extent you can look at hidden fees via the comparison rate. The comparison rate includes the fees and charges applicable to the loan and is usually based on $150,000 over 25 years (however it is possible to work out the comparison rate for different scenarios). The problem with just relying on the comparison rate is that if you have a larger loan, fees have less of an impact and the interest rate itself starts to become more important.
As for your small lenders/big lenders argument - I work as a mortgage broker. I sit down with my clients and look at the cheapest loans and talk through it with them and still probably 80% select a bigger bank compared to some of the cheaper lenders on the market. It comes down to personal preference, but generally with a smaller lender there are better rates on offer, but there is a trade off in that they don't have millions of dollars to throw at their internet banking platform or their credit assessment might take a bit longer etc. I'm personally a fan of giving the smaller lenders a go if those compromises aren't a deal breaker for you - save a bit of money and in the event that they become uncompetitive over time, you can always look at refinancing your home loan. Given exit costs/deferred establishment fees are a thing of the past for variable rate loans, you don't really have anything to lose by giving them a shot.