The days of having to make appointments with bank managers and trawl around town from bank to bank to apply for a home loan, then having to wait for weeks to find out whether your application was approved, are now thankfully long gone.
Online banking is not limited to allowing you to perform basic banking functions from the comfort of your home or office; it also gives you the opportunity to search and apply for home loans through numerous banks’ and non-bank lenders’ websites in minutes. Hamish Carlisle, managing director, Quick Direct, says the rapid and consistent growth of online business suggests there’s an enormous appetite among customers to do research and initiate home loan applications over the internet.
“Mortgages have lagged behind other lending products such as personal loans and credit cards where almost half of new applications are taken over the internet, but this is set to change,” he says.
Carlisle points out, though, that the face-to-face approach will always be there for less confident customers. However, he warns: “You’ll increasingly pay a premium for this service.”
Before you point and click
Whether applying for a home loan face to face or online, the most important preparation you can make is to determine how much you can afford and what loan features you need.“
I can’t emphasise enough the importance of developing your own picture of what you can afford before applying for a home loan,” says Carlisle. “Experienced consultants can help you out to some degree, but ultimately you know your circumstances best and you need to be comfortable with your ability to make repayments, both initially and down the track.”
He adds that borrowers shouldn’t rely entirely on their lender to tell them how much they can afford to borrow, but rather rely on their own knowledge in regards to their own circumstances.
Based on a survey conducted by Fujitsu Australia, nearly 70% of respondents said they used the internet. Of that number, a staggering 65% said they would use it as part of a loan application search, combining bank and broker websites as well as comparative sites. Thirty-three per cent said they would be comfortable applying for a home loan online.
However, Martin North, managing consulting director, Fujitsu Australia, says that although the results were generally positive, the survey also indicated that an element of fear still exists. “Of the 33% of people who would apply online, only a little under half of those respondents have actually tried it. We found the reasons behind this being that forms were inconvenient, and difficult to download and send through, while security and safety concerns also ranked highly.”
Interestingly, the study revealed that the types of customers using online facilities tended to be Generation Y, with 75% preferring to use a broker rather than a bank, while the 50-and-over age group also showed a preference for using online services.
Drawbacks of applying online
Some online lenders work primarily via the internet and don’t provide face-to-face support. This is a downfall for those whose circumstances require further assistance.
Security and privacy concerns can be a big downside when applying for a home loan online. Make sure you check that the website is secure when submitting personal information and never disclose passwords. This can be checked by ensuring the safety padlock is displayed on the page, which ensures information sent isn’t intercepted or altered.
Changing passwords regularly is also recommended.
Applying for a loan online can be overwhelming and impersonal for those who are unfamiliar with navigating websites. Someone who is able to use the internet for purposes such as e-mail or basic research, but isn’t technically savvy enough or comfortable when inserting a myriad of passwords and personal details, may find online forms frustrating and untrustworthy.
Speaking to a mortgage broker or lender face to face can be easier for first-time borrowers. For most people, applying for a loan is a long and complicated process involving a great deal of money. Naturally, they want to obtain as much information as possible before signing on the dotted line, and that’s often easier to do through human interaction.
For strategies on how to choose a mortgage broker, turn to page 54. To search for your local broker go to www.yourmortgage.com.au
Credibility can be difficult to ascertain online. Research and check a provider’s background to ensure it’s a reputable company before outlaying your personal financial
details. It’s usually safer to stick with companies which are already well established and well known if you’re new to the process.
Some lenders only offer basic products over the internet. As with everything, shop around and research the products of numerous banks and non-bank lenders so you get a good idea of what’s being offered, what’s the norm and what doesn’t sound right.
Hidden fees and catches
Always read the fine print, because if it sounds too good to be true, it probably is. Print out the loan conditions and really study the terms before you commit.
Check at what stage the lender provides a credit check. Too many credit checks on your record can have a negative effect on your credit score. Lenders shouldn’t need to do a credit check during the initial pre-approval stage, so determine that this is only done when it’s really needed, either towards the end of the enquiry process when you’ve become serious about applying or after you’ve lodged your application.
Is it faster to apply for an
The jury’s still out on this one. In terms of finding out about home loans offered by a variety of banks and lenders then making an application, borrowers will definitely save time doing their research and applying online. However, enticing tactics promising five-minute online applications can be misleading, as the complete procedure is not necessarily faster.
While it can take five minutes for the experienced internet user to fill out an online application form, you need to take into account the time it takes to gather the information. Most lenders will make contact with an applicant within 48 hours, but approval can take from three to eight working days, including credit checks. If approved, the loan offer and loan terms then need to be physically signed and returned to your lender before the deal is sealed.
Taking the online route
Checking your borrowing power has never been simpler or quicker. Most online home loan applications feature a calculator, five-minute application and instant pre-approval for qualifying customers.
As with regular home loan applications, online forms require the same intricate details concerning your financials. You’ll need to provide:• Your monthly salary, gross and net income figures from the last two years• If you’re self employed, income figures from the last two years’ tax returns• Details of previous employers if you haven’t been with your current employer for at least three years• Driver’s licence number• Any current account numbers • Details of previous addresses if you haven’t lived at your current address for at least three years
Due to the rapidly increasing number of borrowers using online services as well as the large range of choices available at bricks and mortar offices, lenders have been forced to simplify their home loan applications, reduce the time it takes to complete applications and create easy to navigate websites.
Applying online isn’t for everyone, but for web-savvy customers who have done their homework it represents a convenient option and a great way to save money and time, rather than physically travelling to lenders.
Security should always be your number one priority when filling out an online home loan application or using any sort of other online banking facility.
Brett Morgan, executive director of retail mortgages, ING Direct, advises potential online applicants to take the online option very seriously to avoid succumbing to online fraud. “Net security is two-pronged. Consumers must play an active role in protecting themselves online, by taking simple measures like installing a firewall and anti-virus software on computers.”
Other vital security measures include:
Logging out correctly after each session on the internet
Remaining selective about online banking at shared or work computers
Updating personal details and mobile phone numbers to enable notification of any unusual activity
Regularly updating and protecting personal passwords
Setting daily withdrawal limits to suit your needs
If you encounter difficulties with your application, you should first try to speak to the company’s representative, as recommended by Andrew Russell, Virgin Money’s director of home loans.
“Borrowers should use a provider that gives phone as well as face-to-face support to ensure that any questions can be answered along the way.”
Borrowers should familiarise themselves with the terms and conditions of each individual bank or lender in order to be clear about their rights and to quash any confusion regarding responsibility, liability and security from the get go.
Check there’s phone support available or offices in your city, in case you need to deal personally with staff should any dealings go awry.
Martin North of Fujitsu predicts major change in regards to future real estate online transactions.
“The US and Europe currently have an online feature for reserve auctions, where a party can specify the home loan they’re after, submit the details online, and then sit back and wait for various interested lenders to bid for that loan,” he says.
“I see this as being a powerful proposition for consumers as it ultimately aids in competition, which is an element Australia is presently lacking in the world of internet finance.”
North says that despite some optimistic figures, Australia still has a long way to go. “My belief is that the online channel is very important and, so far, has been under-represented and undervalued in the industry. Providers in the UK are already maximising the benefits of online home loans by providing automated models presenting instant confirmed offers and credit checks. Some Australian services still take five to eight days to be approved.”
But for now, the experts’ message is clear: whether you’re applying for a loan online or face to face with a broker or lender, do your homework, explore all financial avenues available, ask questions where figures are concerned and always make security your number one priority.
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