Home loans are often complex, with lenders providing additional features often to simply drive in new business as opposed to really helping you save money. We’ve collated the top five home loans features you should be taking advantage of.
An offset account, much like a transaction account is linked to your home loan and allows you to deposit and withdraw funds,. The main difference between the two is the balance of the offset account is offset against the balance of your home loan when interest is calculated. This reduces the amount of interest you are charged, effectively reducing the term of your loan, & potentially saving you thousands.
A Split home loan refers to splitting your home loan balance so that one portion is charged at a variable rate and the other is charged at a fixed rate. For example, you might decide to have a 60:40 split on a $500,000 home loan. This would mean $300,000 of the loan was being charged a variable interest rate and the remaining $200,000 was being charged a fixed interest rate. Borrowers choose to split their home loan as it grants them the best of both variable and fixed loans. A fixed-rate gives you cashflow certainty and the security that if interest rates were to rise, you would be protected. A variable-rate typically gives you the flexibility to make additional unlimited repayments or change your repayment frequency. You can typically split however you want, depending on your lender, whether that be 50:50, 75:25, or 90:10.
Making additional repayments on your home loan can be a great way to pay it off quicker and potentially save you thousands in the long term. Whether it’s $100 extra a month or a one-off lump sum, making additional repayments and not sticking with the minimum monthly repayments, is something all borrowers should consider. Some lenders will charge you for making extra repayments, have an annual limit on the number of repayments you can make, or have a minimum or maximum additional repayment amount. We offer unlimited additional repayments on our loans for no extra cost.
A package home loan allows you to combine your mortgage with other banking products, like another home loan, a car loan, or an offset account. Package loans will often offer discounted interest rates and charge an annual package fee for the cost of combing the products. Typically, this fee works out to be more cost-effective than if the products were separate, due to the individual fees if each of the products were separate.
An offset sub-account allows you to withdraw extra repayments you have made on your mortgage. Your extra repayments are pooled together and are separate from your minimum monthly repayments to make them available for withdrawal. For example, if your minimum monthly repayments $3,000 and in one month you repaid $5,000, you could withdraw this $2,000 should you wish too. There are no restrictions on what you can use redraw funds for, but people most often utilise them to pay off debt, and fund renovations, holidays, and a wedding. It’s worth noting money in redraw accounts isn’t as accessible as money in offset accounts, as the money is technically the lenders. In some cases, same-day withdrawal isn’t available.