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Which bank should you choose for a home loan
Just as each home is different, so is every homeowner and home loan. While this does mean there is no one best bank for all home loans, you can still research and compare your options carefully to find the best home loan for you.
For some, you may prefer to stick with your childhood bank for convenience sake. For others, your priority may be nabbing the lowest interest rate, regardless of brand names.
Generally speaking, the best bank for your home loan will depend on a variety of factors, including:
- Convenience
- Low rates and fees
- Customer service
- Technology and innovation
- Security
Let’s explore the different types of lenders for home loans, and how you can compare your options to find your best mortgage.
How to compare banks and home loan lenders
There are two different types of home loan lenders: Authorised Deposit-Taking Institutions (ADIs) and Non-ADIs. According to the Reserve Bank of Australia:
ADIs include;
- Banks; including the Big Four Banks (B4Bs), their subsidiaries (e.g. Bankwest or Suncorp), neobanks and some online lenders
- Credit Unions and Building Societies
Non-ADIs include;
- Money market corporations (brokers and dealers)
- Finance companies (some online lenders, some brick-and-mortar companies)
Why this matters for your home loan lender is that deposits made with ADIs (up to the value of $250,000) are protected by the government. Smaller lenders can also be ADIs, meaning that just because a home loan lender isn’t one of the big four banks, doesn’t mean that your money isn’t as safe there.
All ADIs carry the same protections and security as a major bank through the Financial Claims Scheme (FCS). This means that your deposit - up to the value of $250,000 - is protected if the lender were to go under.
Which bank is suitable for different home loan factors?
Factor | About | Where do customers go? |
Convenience | The convenience of accessing all your financial products at once through the one lender can be a key deciding factor. Big banks and lenders may be able to offer a greater range of products, from credit cards and savings accounts, alongside home loans. | Big banks and ADIs. |
Lower rates and fees | On average, smaller competitor lenders may offer lower rates and fees on home loans as they have fewer overheads - particularly online-based lenders. | Depends on your financial situation, but smaller banks and online lenders on average. |
Customer service | If you rely on face-to-face customer service, a bank that offers branches near you may be a key priority. | Depends on your area - big banks or regional-focused banks. |
Technology and innovation | Typically, smaller lenders may be quicker on the draw when it comes to innovative fintech and helpful technology. If you love savings tools and advanced apps, a tech-focused lender may be a better option. | Online or app-based lenders. |
Security | While all ADIs protect your deposits through the Financial Claims Scheme, there is a greater sense of security when you use a big four bank for your home loan. These banks have more backing and government support, and are viewed as ‘safer’ and less likely to go under. | Big four banks, major institutions. |
How to compare home loans
Now you have a better idea of which type of bank or lender may be best suited for you, it’s time to compare home loans. This can be easily done by yourself using comparison tools, or you can speak to a mortgage broker for more personalaised information.
- Calculate your budget. Using a mortgage calculator to work out how much you can borrow, what your repayments could be, and how much you can pay as a deposit (including grants and incentives).
- Use comparison tables. Comparison tables help you to compare apples with apples by filtering down a range of home loan options, and showing you how they measure up to one another side by side. You can easily view interest rates, fees, monthly repayment estimates and more using RateCity’s Comparison Tables.
- Check Real Time Ratings™. If you want to narrow down your short list of options, look at the Real Time Rating™ score of the loan. This rating can provide you with a better estimate of the cost and flexibility of a home loan. The home loan is scored out of five, and each score is updated daily to more closely indicate a home loan’s overall value. You can also compare some of the top-rated home loans on the RateCity Leaderboards, or look for which mortgages have won a RateCity Gold Award.
- Consider help from a mortgage broker. Mortgage brokers can look at your finances and recommend mortgage deals that may suit your personal goals and financial needs. Brokers may also negotiate on your behalf to help you get a better deal, offer access to exclusive home loan offers, and help you with your mortgage application, to help save you time and hassle.
Compare home loans in Australia
Product database updated 27 Nov, 2024
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