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Published May 20, 2024
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How To Choose A Mortgage Lender

Compare rates, fees, repayment options and customer reviews across several types of lenders, to be sure your mortgage lender meets your needs.

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Whether buying a house or refinancing, knowing how to choose the right mortgage lender is important. Finding the best lender for you can be a painstaking task.

To simplify the process, start with as clear an idea as possible of your lending priorities — a competitive rate or a well-known brand, for example — and the type of home loan you need.

» MORE: Can I negotiate my home loan interest rate?

Comparing types of mortgage lenders

There are many types of mortgage lenders out there, in physical offices and online, so you are definitely spoilt for choice these days. Common types of lenders consist of:

  • major banks
  • customer-owned banks
  • private mortgage lenders
  • online-only/digital banks
  • fintech companies.

Going with a major bank, possibly the one you’ve dealt with since you were a kid, may have its advantages as far as continuity goes, but it might not always be the best or most affordable option. In many cases, it pays to compare mortgage offers from multiple types of lenders before deciding which is best for your needs.

Start with your priorities

Before you start wading through everything on offer, the best strategy may be to compile a list of what you want, including:

Knowing the right questions to ask a prospective lender will also help you choose the best one.

You may also want to talk to a mortgage broker who might have special insights into what it is you’re looking for and how to match you up with the best available lender. 

Assessing rates and fees

Interest rates impact the total cost of your home loan, so it’s common to want the lowest mortgage rate possible. 

When comparing rates, be mindful of the fact that the mortgage with the lowest rate is not automatically the best one — it may contain any number of fees, or terms and conditions that could leave you behind in the long run

It’s often prudent to get a mortgage professional, such as a solicitor or mortgage broker, to go over the mortgage fine print for you, especially if you’re taking out a fixed-rate mortgage for the first five years of the loan or for a shorter period. These mortgages revert to variable rates that are often much higher than the standard rate and may also contain restrictions on how much of the principal you can pay off by making extra repayments. 

You may opt to go for one of the so-called online-only neobanks that have recently set up shop in Australia. These lenders promise faster application processing times and may require less documentation than traditional lenders. They also promise highly competitive interest rates, fees and charges. 

The flipside, however, is that these online-only lenders may lack the type of personalised customer service you may otherwise rely on during the course of your mortgage journey. There may also be a lack of reliable feedback and reviews from existing customers.

Repayment options

A reputable lender should be able to provide repayment options that are straightforward and as painless as possible while simultaneously offering redraw, offset or line-of-credit options where you can easily access the amounts you have paid off above the minimum in case of emergencies or simply changed financial circumstances. 

Ideally your mortgage lender should be able to offer you a plan of action if something unforeseen does arise and you’re unable to make your minimum repayments. They may also be able to recommend the appropriate insurance products for such eventualities.


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What Is Mortgage Protection Insurance?

Mortgage protection insurance (MPI) could offer peace of mind if you’re concerned about being able to make repayments at some point during your loan. There are caveats to keep in mind, though.

How to Calculate Mortgage Repayments

How to Calculate Mortgage Repayments

Learn how to calculate mortgage repayments using the principal (the amount borrowed), the interest rate and the time left on your home loan.

How to Pay Off Your Mortgage Faster

How to Pay Off Your Mortgage Faster

Pay off your mortgage early by making extra payments, switching to fortnightly payments, opening a redraw facility, offset account, refinancing and more.

Innovative Home Loan Features To Know

Innovative Home Loan Features To Know

Home loan features — like cashback incentives, round-up tools, customisable repayment schedules and more — aim to help borrowers manage mortgages more effectively.

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