30 Jun 2021

Is a Private or Government Bank Better for a Home Loan?

How Much Can I Borrow? 3 Questions to Consider Beforehand


In Australia, each central government-run bank has a specialist department for high-value clients. This Private Bank assigns you your own banker, allowing you to bypass the bank’s call centre. However, just because you have your banker doesn’t mean you’ll save any money, particularly home loans.


Costs of Private Banks

The first few loans may be competitively priced, with a price difference compared to government banks between .2 and .4%. On a loan of $5 million, that’s only around $10,000 to $20,000 a year. However, once you bank with the private bank regularly, making it your primary financial institution, they will charge you .4 to .55% more on the same loan, between $20,000 and $27,500 a year. 


Dangers of private banks

Using one bank to handle all of your loans, financials, and investments can put you at risk if you find yourself in a challenging financial situation one day. Having all your assets tied up in one place puts the bank in complete control, allowing them to force you to pay down debts before selling your property. 


In addition, banks don’t always reward loyal customers with the best interest rates. Usually, they reserve their best rates for new customers. Meaning, if you shopped around at different banks instead of applying with your private bank, you may have had a lower interest rate. 


Most banks have a form of loan they specialise in. Some banks specialise in commercial loans, while others specialise in home loans. If you apply for loans through the same bank, you may have higher interest rates, especially if the loan is in an area they aren’t familiar with. 


When applying for a loan, it is essential to consult with the brokers at Mortgage House. We have access to thousands of lender information–from private banks to government banks. We can help you find a lender who specialises in your loan type and who offers competitive rates. 


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