Is it better to approach “your bank” for your home loan or not?
I am often asked this question when clients are considering their home loan lender choice and the answer can vary. Sometimes it can be helpful, sometimes it can work against you and sometimes it doesn’t matter. It can depend on the lender and how well their system captures past performance both good and bad.
It is important to consider with “your bank or lender” what type of customer you are. Do you simply use deposit products such as savings accounts, cheque accounts, online savers etc or, do you have existing “credit products” ie home loan, personal/car loan, credit cards etc? When considering the benefit or otherwise of using “your bank”, having existing credit products( that have been paid on time) will give more benefit that simply having a savings account or two.
Existing credit products gives your lender the opportunity to assess your past ability to pay on time and can have a positive impact on a home loan application, particularly if the application is close to the line.
Sometimes going to “your bank” can work against you. Bad conduct in the past, even if it was years and years ago can be enough to cause a current application to be declined. Even if it was rectified it can still linger on your client profile. It doesn’t even have to be bad conduct on a past loan. You may have an old savings account you’ve forgotten about that hasn’t been used for years that has gone into arrears because of unpaid monthly fees. I recently had one with an old savings account that was in arrears by $4.59, which caused an issue with the home loan application for good clients of this particular bank. In these cases, choosing a lender that you haven’t used before can improve your chances of success as they don’t have access to the same information as “your bank”.
If you have no lingering or past issues, then the choice of lender whether “your bank” or not isn’t as important.
Home loan lender choice is not just about the cheapest rate. As you can see, many other factors can influence the choice.
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