According to research conducted by Greater Bank, Australians are faced with a tough decision when it comes to selecting a lender, choosing between prioritising ethics or cost savings.

The study found that a significant proportion of home loan borrowers, approximately 92%, would prefer to deal with lenders who have a high standard of business ethics, environmental commitments, and social and community values. However, around 78% of respondents admitted that they find it challenging to balance their values with the desire to secure the best rate.

Megan Keleher, the chief customer officer at Great Southern Bank, said that in a climate of rising interest rates, it is understandable that many households prioritise finding the lender who can provide them with the best rate and loan product.

While there is a perception that choosing an ethical or green lender would be more expensive, Keleher points out that research shows that this is not necessarily the case. Lenders with strong ethical values can provide excellent rates, reduced or no fees, and longer-term value, meaning borrowers don’t need to compromise on their values to choose a bank that aligns with their principles.

The study also highlighted that 94% of people who are either refinancing or planning to do so cite rising interest rates and increasing cost of living as their motivation for doing so.

What are buyers’ other considerations?

When it comes to the particulars of a home loan, the criteria for most buyers remain the same.

Interest Rates

This is one of the most critical factors that homebuyers consider when selecting a lender. Interest rates determine the amount of money a borrower will pay over the life of their mortgage, so it is essential to compare rates from different lenders.

To effectively compare interest rates, borrowers should gather quotes from multiple lenders. These quotes should include the interest rate, any associated points or fees, and the annual percentage rate which incorporates additional costs such as closing costs. It’s important to note that the APR provides a more comprehensive view of the overall cost of the loan. The  most efficient way to go about this is to get the help of a mortgage broker. 

Loan Terms

Loan terms, such as the length of the mortgage and the type of interest rate, can have a significant impact on the overall cost of the loan. It is crucial to review the terms and conditions of the loan and understand how they will affect the repayment amount.

Reputation 

The reputation of a lender is another crucial factor that homebuyers consider. Borrowers want to work with a lender that has a good reputation for providing excellent customer service, reliable lending practices, and fair lending terms.

Reliable lending practices are also highly desirable. Homebuyers want to work with lenders who have a track record of being trustworthy and ethical in their lending practices. This includes providing accurate and reliable information about loan terms, fees, and requirements, as well as adhering to industry regulations and guidelines. Checking for any past legal or regulatory issues with a lender can help borrowers assess their reliability.

Fair lending terms are another aspect that borrowers consider when evaluating a lender’s reputation. This refers to the lender’s commitment to providing reasonable and competitive interest rates, loan terms, and repayment options. Homebuyers want to ensure that they are getting a fair deal and not being subjected to predatory lending practices. Researching and comparing loan offers from multiple lenders can help borrowers gauge the fairness of the terms being offered.

To assess a lender’s reputation, homebuyers often turn to online reviews, industry ratings, and testimonials from previous customers. These resources can provide insights into the experiences of others who have worked with the lender, helping borrowers gauge the lender’s overall reputation.

Fees

Homebuyers need to consider the fees associated with a mortgage loan, such as application fees, appraisal fees, closing costs, and ongoing maintenance fees. These fees can significantly impact the overall cost of the loan, and borrowers should compare fees from different lenders to find the best deal.

Application fees are charges imposed by lenders to cover the costs associated with processing a loan application. These fees can vary among lenders and are typically non-refundable, so it’s crucial to consider them when evaluating the total cost of the loan.

Appraisal fees are incurred when a professional appraiser assesses the value of the property being purchased. Lenders require appraisals to ensure that the property’s value aligns with the loan amount. The cost of the appraisal varies depending on factors such as the location and size of the property. It is advisable to inquire about the appraisal fee upfront to include it in the overall loan cost assessment.

Closing costs refer to the expenses incurred during the final stages of the homebuying process. These costs include legal fees, title search fees, government charges, and insurance premiums. Closing costs can add a significant amount to the total cost of the loan, so borrowers should carefully review and compare these costs from different lenders.

By carefully comparing the fees associated with mortgage loans from different lenders, homebuyers can ensure they are getting the best possible deal. It is recommended to request a breakdown of all fees involved in the loan process from each lender and consider the overall cost, including both upfront fees and ongoing maintenance fees. Taking the time to understand and compare these fees can help borrowers make informed decisions and potentially save money in the long run.

Loan features

Homebuyers may also consider the features of a loan, such as the ability to make additional repayments, offset accounts, or redraw facilities. These features can help borrowers save money on interest and reduce the overall term of the loan.

Customer service 

Homebuyers want to work with a lender that offers excellent customer service, clear communication, and quick response times. Borrowers should look for a lender that is easy to contact and responds promptly to any questions or concerns.

Choosing the right lender involves considering a range of factors beyond ethics and cost savings. Homebuyers should take the time to research different lenders, compare rates and fees, review loan terms, and consider the reputation and customer service of potential lenders before making a decision.

The path to getting that one perfect mortgage is an arduous one. But the good news is that you can always enlist our help to make the process faster and quicker. It’s our expertise to give you the best home loan option on the market.