A guide to the different types of home loan & mortgage lenders in Australia. Our guide to the different types of home loan and mortgage lenders in Australia will help you decide which mortgage professional to approach.
Mortgage brokers are responsible for introducing borrowers to lenders. They act as an intermediary offering prospective borrowers information on various mortgage providers and their products.
With many types of lending institutions and a vast array of mortgage products on offer today, you as a borrower have many options and choices. The task of the mortgage broker is to determine the most suitable loan for you. The broking service is often free, and the broker will generally receive commission from the lender they recommend.
Banks are, of course, the original lending institutions and they mostly source their funds through customer term deposits and savings deposits. Australian banks are regulated by the Australian Prudential Regulation Authority.
Customers who make deposits are paid interest on their accounts, and their funds are then available to lend to borrowers. In turn, these borrowers pay interest to the bank on the sum lent. The margin between the interest paid on deposits and the interest received from loans provides banks with their major source of revenue.
One downside of banks is that they generally have a large network of branches supported by many staff members. The costs of these services and branches has to be recouped somewhere – maybe from you, as a borrower – whereas other types of lenders may not have such hefty overheads.
A credit union is a cooperative that is owned and controlled by the people who use its services. Each member is both a customer and a shareholder in the credit union.
Deposits from members are used to fund loans to other members, with the credit union business structure facilitating the process. Credit unions serve people who share a mutual interest, such as where they work, live, or go to church. Since credit unions are non-profit organisations with no external shareholders, there is no pressure to earn profits at the expense of customers.
Like banks, they offer a wide variety of banking facilities such as loans, deposits and financial planning, but because the main function of a credit union is to serve the needs of members rather than make a profit, they often put a great deal of emphasis on customer service.
Building societies operate in the same manner as banks and obtain their funding primarily through customer deposits. As with credit unions, customers are members. In a sense the customers own the society, so they are often referred to as mutual societies.
Mortgage managers are lending specialists who arrange funding for home and investment loans. They should not to be confused with with mortgage brokers, or with an institution that offers access to a personal account manager.
Unlike banks, building societies and credit unions, mortgage managers do not have a base of customer deposits with which to fund their loans. Instead, they source their funds via a process known as securitisation, which means assets with an income stream are pooled and converted into saleable securities.
The job of a mortgage manager is to set up the loan and liaise with all parties involved, including the originators, trustees, credit assessors and borrowers. They provide the customer service role and are there to manage your loan throughout its term.
When you borrow money from a mortgage manager it’s not actually the mortgage manager who is the owner of the mortgage – they are simply the party instructed to manage the mortgage. The original provider of the funds is the ultimate owner and this could range from a superannuation fund or unit trust to an individual who has invested in mortgage-backed securities.