Online Home Loans – Monzi’s A to Z

With online home loans you can apply whenever and from wherever you like. Apply for a mortgage from the comfort of your own home. Purchasing a home could be more accessible than you think. Read on to find out more.

Please note, certain ideas and products presented in this article may not be offered by Monzi nor the lenders we work with. This article presents only general information. Consider seeking professional financial, taxation, legal or other advice to check how the information and ideas presented on this website relate to your unique circumstances.

What are online home loans?

In short, they’re exactly what you would expect. They’re simply a mortgage offered by an online lender. That means rather than heading to the bank, all you need to do is complete an application online and provide the necessary details. From there, your lender will assess your application and you’ll receive an outcome.

It’s all about convenience and making your life easier. Everything else is moving online, so why shouldn’t home loans too?

If everything goes to plan, you can apply and be approved for a mortgage all from the comfort of your home. While it will take time, the process is often more streamlined and simpler than applying with a traditional lender.

Regardless of whether you’re an experienced developer or looking for your first home loan, you may be able to apply online.

Keen to know more? Read on and we’ll breakdown all the key information you need. Let’s go.

Who are the best online mortgage lenders?

In short, it’s difficult to say. There are now a number of lenders in the online marketplace willing to offer home loans. As a result, the opportunity exists to shop around so that you can find the online mortgage lender that is best for you.

As a guide, some of the more popular lenders offering online home loans include:

  • loan.com.au
  • UBank UHomeLoan
  • IMB Bank
  • Tic Toc

Is it better to get a mortgage from a bank or online?

In short, it’s your decision. You will need to decide what you value as well as what the best deal is.

As a guide, the main benefits of applying online include the simplicity and the fact that processing and closing times can be significantly shorter compared to other financial institutions.

In saying this though, there’s something to be said for the trusted nature of banks and traditional lenders. They’ve been in the game a long time and as a result, you know what you’re signing up for.

If you have no preference either way then it simply comes down to the products on offer. Find the best rate and the most manageable repayments so that your mortgage fits your budget.

Am I eligible for online home loans?

Mortgages have the strictest lending criteria that you will come across. And they should. After all, you’re potentially borrowing amounts ranging well into the hundreds of thousands. As a result, lenders want to be sure that you have the capacity to repay the money you borrow.

Typically, to determine your eligibility, lenders will assess the following:

  • Your credit history
  • Employment
  • Current income, assets, expenses and outstanding debts
  • Your deposit amount
  • The value of the property that you are buying

What information must I provide when I apply for online home loans?

There are a host of necessary documents that lenders require to assess your application. Typically, they fall into three categories: assets and liabilities, identity documents and proof of income.

See below to get an idea of what information you may need to supply:

Identification

You must prove your identity. Documents that can do this include:

  • Current passport (an expired passport may be accepted if it was valid in the past two years)
  • Driver’s licence
  • Birth certificate
  • Photo ID
  • Medicare card
  • Utility bills featuring your name and address

In most cases, these documents get a point value (e.g. 50 points) and there will be a threshold that you must meet (e.g. 100 points).

Proof of income

In order to prove your income, lenders will typically require payslips dating back two months. However, some lenders may look back even further than this. It’s simply up to the lender and their assessment policy.

In addition to this, it’s possible that you receive multiple streams of income. So, ensure you can provide evidence of this too. As a guide, this may include:

  • Shareholdings and dividends
  • Rent payments received from property or other assets that you own.

Assets and liabilities

To get a complete picture of your financial situation, your income isn’t enough. Lenders will need to assess your current assets and liabilities too.

Generally, assets refer to anything of value that you own. This could include vehicles, property and even term deposits and high-interest savings accounts too.

On the other hand, liabilities refer to cash outflows and potential expenses. This typically refers to any outstanding debts and on-going repayments (e.g. car loans or credit card debt).

What is the application process?

There are a number of distinct steps that your application will involve. Obviously, this starts with submitting your application and ends with you owning your own home.

As a guide, once you submit your application, your lender will assess your application briefly to assess your eligibility. If you meet the necessary criteria then you will receive conditional approval. This is an estimate of what the lender may be prepared to lend you.

From there, a more thorough evaluation will take place including a credit check and a property valuation too. If you meet all the requirements then you will receive full approval. In other words, your application is successful and all that’s left to do is settle. Just like that you can be a homeowner.

Do online lenders offer lower rates?

While nothing is certain, it may be possible to access lower rates through an online mortgage lender.

This is due to the fact that as they are online, there are lower overheads. The cost of running a branch is eliminated and those savings can be passed onto you via lower rates or fewer fees.

Combine this with the simplicity and convenience an online service provides and it’s easy to see why more and more Aussies are considering online home loans.

What is the lowest home loan interest rate Australia?

While we cannot say what the lowest rate may be, if you are looking to access a more competitive rate than there may be a few things that you can do.

Firstly, if you’ve got a good credit history and are in a secure financial position then lenders may be prepared to offer better rates, given that you’re less of a risk. If that’s not an possible for you, paying a larger deposit, applying for a smaller mortgage or having a guarantor co-sign your loan could be other potential options.

However, these options may not reduce your interest rate. Ultimately, your lender will determine the rate that you are offered.

Should I select a fixed or variable rate online home loans?

In short, it’s up to you.

Variable rate home loans are usually the more standard option and, on average, will save you money over time compared to a fixed rate. Not only that, they typically come with greater flexibility including the option to establish an offset account as well as make additional payments.

In saying this, if you prefer certainty then a fixed rate could also be an option. You know exactly what you must pay which makes budgeting easy. However, you often must pay a premium for this certainty in the form of a higher rate.

If you’d prefer a little bit of both, a split rate mortgage might be for you. In short, you can divide your mortgage into fixed and variable portions. For instance, you may pay a fixed rate on 40% and a variable rate on the other 60%. That way, you can balance the benefits of both mortgage types.

What is a 5 year fixed mortgage rate?

A 5-year fixed term allows you to lock in your mortgage rate for five years. Once that period has elapsed, your loan will automatically switch to a variable rate.

In short, it’s about providing a period of certainty at the beginning of your loan. Your rate is locked in which means you know exactly what you must pay. From there, budgeting is easy.

In addition to this, it might also be useful if you anticipate a rise in interest rates. Lock your rate in now and avoid the additional interest costs. However, the obvious downside is that if rates drop, you will be stuck paying more interest than you otherwise would have.

Lenders typically offer fixed periods ranging from one to five years. Evaluate the benefits and potentially downsides to determine if it’s the right option for you.

Online home loans close up of hand holding house keys in front of white door

Can I get online home loans with a 500 credit score?

Potentially, however, there are a range of other factors and considerations that will go into the decision.

Generally, most lenders will have a minimum credit score requirement. This will vary from lender-to-lender based on their individual policies. As a result, you may need to do some research to find a willing lender.

In any case, even if loans are offered with a credit score of 500, you will still need to prove that you are earning an adequate income and have the capacity to make your repayments. In other words, your credit score is simply one part of the process.

What is the deposit for home loans?

In order to get a mortgage, you will typically need to pay a deposit. This will usually be a fixed percentage of the value of your property. However, the minimum required deposit will vary between lenders.

In most cases, particularly if you’re applying with a bank, you will need to pay a 10% deposit. Although, it’s wise to aim for 20%. In saying this though, there may be other lenders willing to accept a 5% deposit or, in rare circumstances, no deposit at all.

However, for this to be possible, you will need a guarantor. This is a person who provides additional security via their own home equity to cover your deposit. As an example, parents of first home owners are guarantors.

Can I get interest-only online home loans?

Online mortgage lenders may be willing to offer a range of products including interest-only loans. In short, an interest-only loan means that you are only required to make the interest payment on your loan for a period of time. Once that period has elapsed, it then reverts to the standard principal and interest structure.

For most homebuyers, an interest-only loan is not an advisable choice. However, they do serve a purpose.

For homeowners looking to sell an existing property, while purchasing another, an interest-only can make the transition much more affordable. This is known as a bridging loan.

In addition to this, for homeowners facing a period of uncertainty, switching briefly to an interest-only loan can help buy the time they need to get back on their feet.

What are my repayments for a mortgage?

In short, it’s impossible for Monzi to say.

Your lender will calculate your mortgage repayments based on the amount you borrow, your repayment term and your interest rate. As a result, they can vary significantly from one mortgage to another.

As a guide, the easiest way to ensure that your repayments are suitable is to select the right repayment term. Most mortgages come with the option to make repayments over periods ranging from 10 to 40 years.

Obviously, the longer the term, the smaller your repayments will be while the opposite will be true too.

As a result, aim to find the right balance. Try to repay your loan as efficiently as possible while still ensuring that your repayments fit your budget comfortably.

Online home loans calculator

Online home loan calculators make it easy to get an idea of what you must pay. In short, simply enter the key details of your loan (interest rate, term, amount) and you’ll receive an estimate of what your repayments and total loan cost will be.

Many lenders and financial institutions offer these calculators free online through their websites. So, make use of them. While all the figures are simply estimates, they are useful tool to assess whether a mortgage is a realistic option for your financial situation.

How do I compare online mortgages?

Sure, you could just accept the first home loan you find, however, it will almost certainly cost you money.

The home loan market has never been more competitive than it is today. Whether it’s through a bank or an online lender, you’re spoilt for choice. So, take the opportunity to shop around. Find the right deal to ensure that you are paying as little as possible.

If you’re not sure where to begin, compare the following:

  • Interest rate and fees
  • Comparison rate
  • Fixed or variable?
  • What are my repayments and repayment term?
  • How much can I borrow?
  • Are there any additional features? (e.g. offset accounts, redraw, re-financing options)

For more details, visit Moneysmart’s quick and easy guide to choosing a home loan. It will provide further details to help you make the right decision.

Are online home loans safe?

Yes.

As long as you are dealing with a licenced, trusted and reputable online mortgage lender then there really is no reason to worry. Simply do your research and verify that the lender you are dealing with has ticked the necessary boxes. Read their reviews, check their credit licence and if you have any questions, reach out to them.

As long as you take the necessary precautions, online mortgages are safe.

What fees do lenders charge on online home loans?

While you will need to make principal and interest repayments, lenders may charge a number of regular fees too. They will be outlined in your contract so ensure you take note.

Examples of common fees charged by lenders include:

  • Monthly service fees: for administration and servicing costs of your mortgage. They’re usually quite small.
  • Annual fees: as the name suggests, these fees are charged once a year to account for the costs of your mortgage.
  • Lender’s mortgage insurance: if your deposit is under 20%, you may need to large insurance fees to cover the additional risk.
  • Early exit fees: if you repay your loan early or opt to re-financing through a different lender, you may be charged a fee.

How can I pay off my online home loans faster?

We all want to get out of debt ASAP. Luckily, if you’re a mortgage holder than there may be a few tricks that you can use.

Firstly, consider switching to fortnightly payments. While there’s 12 months in a year, there are 26 fortnights. As a result, the switch to a fortnightly schedule means that you will be able to make the equivalent of one additional repayment each year.

In addition to this, you could consider refinancing at a lower rate thereby reducing the cost of your loan. With more of your repayment going to your principal loan amount, you may be able to repay your loan faster.

The final option is to dip into your savings and make additional or higher repayments. However, before doing this, consider your financial situation and current expenses.

What are the additional costs of buying a house?

Buying a house isn’t as simple as just taking out a mortgage. In fact, there are a range of additional expenses that you should consider before you apply. These include:

  • Building and pest inspections
  • Application fees
  • Insurance
  • Stamp duty
  • Conveyancing fees
  • Removalists
  • Repairs, upgrades and renovations

Paying these costs on top of your deposit can stretch the budget of even the most savvy saver. So, before you begin, ensure that you are certain that you can cover all the costs associated with buying a new home.

For more information, head to our article on comparing home insurance.

Can I negotiate a better rate?

Yes, if through the course of your loan term you feel that you are paying an interest rate that is too high then it may be possible to get it reduced.

To do this, you will need to contact your lender. However, beforehand, do some research and find other comparable mortgages with lower rates so that you have evidence and justification for your request. Often, your lender may be prepared to adjust your rate.

If they are not prepared to do so then refinancing through a different financial institution at a cheap rate may be possible.

What percentage of my income should go to my mortgage?

The standard advice is to not commit more than 30% of your income to your mortgage repayments. Anything over this amount may make it difficult to afford your everyday expenses without depriving yourself of luxuries and treats.

However, if you feel that you can afford to pay more than 30%, then it’s your decision. You can make additional repayments or increase your regular repayment amount to get your loan repaid sooner. Although, be careful and monitor your budget to ensure that it is affordable for you.

Do loan repayments decrease over time?

Typically, they do not. Your loan repayments will remain steady over the course of your loan. However, the difference is that your interest payment will decrease.

Interest is charged on your principal. As you pay off your principal, your interest will shrink given that it’s calculated as a fixed percentage of this amount. As a result, more of your repayment will be put towards your outstanding loan balance.

Online home loans and Monzi

Unfortunately, Monzi is unable to offer home loans. That’s because we’re not a home loan lender. We’re simply here to provide the information that you need to know.

On the other hand, if you need a personal loan then we may be able to help. In short, through our lender-finder service you can potentially access lenders offering personal loans from $300 to $10,000. These loans are usually divided into three categories, see below for details:

LoanAmount offeredSecurity requirementsRepayment term
Small loans$300 to $2,000Unsecured12 months
Medium loans$2,001 to $4,600Secured13 to 24 months
Large loans$5,000 to $10,000Secured13 to 24 months

Repayment terms may vary between lenders. The actual terms of your loan may not reflect what we present above.

Think this is an option for you? Submit an application today. From there, we may be able to pair you with a great lender in just 60 minutes during business hours. Let’s go!

Factor In

Costs

Two credit cards
Two credit cards

You won't use a penny to apply for our lender-finding service, but here's some costs you could expect from a lender

Loan amount

$300 - $2,000

Terms

12 months

Costs

20% upfront establishment fee

+ 4% monthly fee

Example

Loan Amount of $1,000 over 6 months repayable weekly (25 weekly repayments). $1,000 (Principal Amount) + $200 (20% Establishment Fee) + $240 (fees based on 4% per month over 25 weeks) = $1,440 total repayable in 25 weekly installments of $57.60.

Under the current legislation, most small personal loan providers don’t charge an annual interest rate (you’ll know this as an APR) %. The maximum you will be charged is a flat 20% Establishment Fee and a flat 4% Monthly Fee. The maximum comparison rate on loans between $300 and $2000 is 199.43%. This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate

Loan amount

$2,001 - $4,600

Terms

13 months

24 months

Costs

48% annual percantage rate

67.41% comparison rate p.a.

Example

Loan Amount of $3,000 over 18 months repayable weekly (78 weekly repayments). $3,000 (Principle Amount) + $400 (Establishment Fee) + $1,379.06 (reducing interest) = $4,779.06 total repayable over 18 months with weekly installments of $61.27.

The Interest Rate for Secured Medium Loans is 48%. The Typical Comparison Rate is 67.41% p.a. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate with the lender that finances your loan. Click here to see a worked example.

Loan amount

$5,000 - $10,000

Terms

13 months

24 months

Costs

21.24% annual percantage rate

48% comparison rate p.a.

Example

Loan Amount of $10,000 over 24 months repayable weekly (104 weekly repayments). $10,000 (Principle Amount) + $5,577.12 (Interest) = $15,577.12 total repayable over 24 months with weekly installments of $149.78.

The Interest Rate for Secured Large Amount Loans is 48%. Maximum Comparison Rate is 48% p.a. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate with the lender that finances your loan. Click here to see a worked example.