Home loan features to consider

Thinking about your 'must-have' features will help you to choose the home loan that’s right for your needs.

Loan features wish list

Must-haves

Fee-free extra repayments
Paying just an extra dollar a day off your loan will mean big savings in long term interest and see you mortgage-free far sooner. That makes extra repayments (at no extra charge) a feature worth having.

Portability
This lets you take the loan along with you when you move house, meaning you could avoid having to pay break costs for your old loan or establishment fees for a new loan

Nice to haves

Redraw facility
Provides access to any extra repayments you've made. Handy if you're short of cash in an emergency, but it will put you behind in terms of interest savings.


Mortgage offset
An offset account lets you put any savings to work to reduce your loan interest charge. The balance of your savings is deducted from the loan when interest is calculated, so you pay less interest, with more of each repayment reducing the loan balance.

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Common loan features

Offset account

An offset account is a savings account linked to a loan account. No interest is paid to the offset account but instead the balance of your offset account is deducted from your loan account before the interest on your home loan is calculated. Therefore less interest is charged to your loan.
For example, a borrower with a $300,000 mortgage and $10,000 in an offset account will only be charged interest on $290,000 and not $300,000. Some products do not offer 100% offset, while others may require a minimum balance in the account before the offset applies.

Pros:
- Savings interest is taxable, but because your offset account balance is used instead to reduce your loan interest, no tax is payable, so you are effectively reducing your tax bill.
- The interest rate on your offset account is the same as that applied to your loan account. This is a great rate and is much higher than what you could earn on most savings accounts. The interest rate moves with your loan account rate ensuring you get maximum benefit from every dollar in your offset account.

Cons:
- You may have higher monthly fees attached to the account.
- You may need a minimum balance in the account to benefit.

All in one loan account

This is a loan account that acts as a combined mortgage, savings and cheque account. You have a central mortgage account into which your salary and any other cash payments are deposited. The extra cash in your account reduces the principal amount owing and thereby the amount of interest charged. You then access the funds you have left over and above the minimum monthly repayment amount to pay monthly expenses.
These accounts often have a credit card linked to them, with the balance owing on the card at the end of each month being drawn down from the all-in-one account. Standard transactions such as ATM withdrawals and direct debits are also managed through the account so that many borrowers will not need another bank account. This can be an effective way of using the interest-free period on your credit card each month.

Pros:
- Offers flexibility.
- May be tax effective.
- Can result in interest savings if used with discipline.

Cons:
- Higher interest rate than some other products.

Professional package

Professional packages are generally only available on home loan amounts over a certain value. Usually, the greater the loan amount the more likely the lender will be to offer additional discounting on the interest rate.

Pros:
- Interest rate discount.
- May include discounts on other banking products.

Cons:
- Borrower may not need the additional services offered.
- Borrower may be financially better off with a basic variable loan.

Additional repayments

These are payments that you make which are above the standard repayment for your loan. So for example, a $300,000 loan with a 7% interest rate requires a monthly repayment of $2,120. If you want to pay the loan off quickly and reduce the interest bill, you might make monthly payments of $2,500, which would include an extra repayment of $380.

Redraw facility

Allows borrowers to access extra payments that have been made. This money can then be used for a variety of purposes including a holiday, furniture or car. Some lenders have a minimum redraw amount and may also charge a fee per redraw.

Direct salary credit

Allows your salary to be paid directly into your home loan account. This is an advantage if you are not a disciplined saver.

Loan portability

Allows you to take an existing loan to a different property when you move. (Saves you on Mortgage Stamp Duty).

Repayment holiday

This feature offers a complete holiday from repayments or a period of reduced repayments. This can be especially useful during career changes or breaks such as maternity leave.

Switch to fixed rate

Allows the borrower to switch from a variable to a fixed rate loan.

Top-up

Allows a borrower to increase the limit on a home loan, using the equity in your property for other needs (e.g. renovations).

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