In Australia there are now many different types of home lenders, each with different interest rates, terms, conditions and lending criteria. The most widely seen types of lenders are:
• Mortgage Brokers
Not to be confused with mortgage managers, mortgage brokers are responsible for introducing borrowers to lenders – they act as an intermediary offering prospective borrowers information on various lending institutions and their products.
• Mortgage Managers
Mortgage managers are lending specialists who arrange funding for home and investment loans. 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. This is a process whereby assets and an income stream are pooled and converted into saleable securities.
The mortgage managers job is to set up the loan and perform a liaison role with all parties involved, namely originators, trustees, credit assessors and borrowers. They provide the customer service role and are there to manage your loan throughout its term.
• Credit Unions
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.
Credit unions are non profit organisations, and because there are 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. Credit unions main function is to serve members needs rather than make a profit. They therefore put a great deal of emphasis on customer service and meeting the needs of members.
• Building Societies
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 they own the society, which is why they are mainly referred to as mutual societies.
Australian banks are regulated by the Reserve Bank. Banks are the original lending institutions and for the most part they source their funds through customers term deposits and savings deposits via their branch networks.
Customers are paid interest on deposited funds and these funds are then available to lend to borrowers. In turn, these borrowers pay interest to the bank on the sum lent. The margin between interest paid on deposits and interest received from loans provides banks with their major source of revenue.
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