Just as there are many home loans to choose from, there are also plenty of institutions who can lend money. From banks to building societies, we have broken down each one to give you a better understanding of their differences.
Banks, non-banks, credit unions, building societies and mutuals - what are they?
Just as there are many home loans to choose from, there are also plenty of institutions who can lend money. From banks to building societies, we have broken down each one to give you a better understanding of their differences.
There are three main types of financial institutions you are likely to come across while looking for a loan in Australia.
This is probably the type of lender you’re most familiar with. Banks are typically long-established institutions — so you likely had an account with one from a young age.
Banks have a large network of branches, so you may be able to visit one almost anywhere — although internet banking has made branch access less important for many people.
Building societies, credit unions and member-owned banks all fall under the same banner of ‘mutuals’. They are owned by members not shareholders — which is one of their main differences from other banks.
Some people feel a real sense of loyalty towards building societies and credit unions. They value the sense of ownership and personalised experience they often receive.
Non-bank lenders are privately-owned institutions, which are neither banks nor mutuals as they do not hold a banking licence. But don’t let that put you off, as they still abide by the same laws and regulations, which govern all credit transactions in Australia.
An advantage of non-banks is that since they are smaller they can offer a higher level of customer service and are more interested in tailoring loans to individual needs. They borrow funds at wholesale prices and can often provide lower interest rates than banks.
All of these institutions provide home loans, though the way they each operate can differ dramatically. The most significant difference between them is their ownership structure and how that affects their operations.
Banks (and non-banks) are generally owned by shareholders, and are listed on the stock exchange . In contrast, mutuals like building societies and credit unions are owned by their members.
Rather than passing on profits to shareholders, mutuals aim to pass profits on to their members in the form of lower interest rates, lower fees and improved banking products.
As you might expect, there’s no easy answer. No single mortgage lender is right for every first homebuyer. That’s because lenders each have different rules or lending criteria for their home loans.
What matters is that you have the home loan that is right for your needs. Everyone’s financial situation, credit history, and home loan needs are different. It’s worth comparing different loans to find one that’s right for you.
A mortgage broker — like an Aussie Broker — can take the guesswork out of comparing loans and help you make your own decision about which lender is right for you.
So while the landscape of lenders may seem complicated, there is a way of navigating it with simplicity: do your research and speak to an Aussie Broker.
You may have banked with one financial institution for a long time. But that doesn’t mean they have the right home loan for your needs.
In the bank versus broker debate, brokers offer a valuable advantage. A single bank may only have one or a few home loans to choose from. Since a mortgage broker works with a range of lenders, you get the benefit of greater choice — and more options of finding the loan that’s just right for your circumstances.
One big upside of using a mortgage broker goes beyond knowing that you’ll get the right loan for your needs. Your broker can also guide you through the loan application process.
Remember, the choice is yours! If you don’t want to go with a particular type of lender, you don’t have to! The loans and lenders that your Aussie Broker find you will suit your individual circumstance.
Remember, there is no right or wrong answer when it comes to which type of lender is right, it all comes down to which lender is right for you. If you aren’t sure how to compare home loans, speak to an Aussie Broker who can assist you.