Online Lender - First Step Towards Success

My experience is that finding the right mortgage lender is the very first step (yes, even before you go out for your property hunting) towards your property investment success. I am not going to examine the pros and cons of hundreds lenders and products on the market simply because it’s a waste of time. Instead, I would like you to know the answer regardless of your situation or background (just trust me now):

• Principle No.1 – Always use an Online LENDER which is an affiliate of a major bank.

Let me explain this in more details. Nationally, the big banks now control more than 85 per cent of the home loan market - a position which they've recently consolidated through acquisitions (Westpac's purchase of St George, the Commonwealth's buying of Bankwest) and through the effects of the global financial crisis. What it means is that, firstly, it is close to inevitable that your home loan will be through a big bank in one way or the other; secondly, if you are attracted by a non-bank lender which offers you lower introductory rate, you are likely to be caught up by either various follow-up fees or aggressive increase in interest rate after its initial introductory rate expires. So my principle means that, firstly, you are “safe” as you are still in the 85% region; secondly, you will get much cheaper wholesale rate as you are not any more an “individual customer” to the bank. Ok, now who are the subsidiaries? Let me explain this, nearly every big bank has its wholesale subsidiary company which offers very competitive lending rate in order for them to compete with other non-bank lenders in the niche market and eventually squiz them out. The table below listed some big banks and their whole sale subsidiaries:

Name of the big bank - Name of its subsidiary - Website of its subsidiary
ANZ Onedirect http://www.onedirect.com.au/
CBA Homepath http://www.homepath.com.au/
ING Myrate http://www.myrate.com.au/
NAB Homeside http://www.hsl.com.au/
BMC Quickdirect http://www.quickdirect.com.au/

The matter of fact is that the rates from some of those subsidiary companies are so competitive that they cannot afford to accept any new customers (i.e. Homepath and Onedirect). But fortunately, the others are still in business. Just check their website, you will find the rates they offer will be about 0.5% lower than the lowest rate you can get from their parent companies. Do not overlook this 0.5% difference, this means you will pay $1,500 p.a. less in interest alone over a $300,000 mortgage (not to mention other fees and charges) than you would have if you go straight to a big bank at its outset or through a broker. Just note that in a typical property transaction, it will involve stamp duty (about 3.5% of your purchase), legal and other fees on settlement both ways (about 1% of your purchase), property management fee (about 7% of rental income) when you rent your property out, agent fees (about 2.5% of sale price) when you sell your property, and maybe mortgage insurance (about 2% of your mortgage), if you do not try to minimize all these fees, these fees will eventually minimise your net profit in the end.

Some may argue that they do not have much experience when it comes to deal with online lenders. I have or had mortgage with all above-mentioned online lenders except Homeside, and my experience is that, firstly, you will get same quality of customer service from these internet lenders except that you receive the service over the phone or via email; secondly, you need to prepare exactly the same kind of personal financial documents as you otherwise would.

In conclusion, if you want to, one day, become a sophisticated property investor, the very first step is to start use an ONLINE LENDER which you trust. If you are a beginner in property investment and have any question, please feel free to email me: smartinvestment@email.com.