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Home Loan Features
Home
Loan Redraw Facility
Offset
accounts
Extra
repayments
Interest
only payments
Portable
Home Loan
Direct
salary credit
Professional
Package
Home Loan Redraw Facility
A redraw facility allows you to make extra payments on your home loan and then
access this money again when you need it. By paying off a greater amount of
the loan you save money, as no interest is charged on the amount already
repaid, and with a redraw facility you have the security of knowing you can
access the money if need be.
Some lenders will charge you for every re-draw, Some loans will come with a number of free redraws per month. Of ten the loans that offer free redraws have a slightly higher interest rate. Therefore before deciding on a loan you need to consider how you intend to use your loan, frequency of required redraws etc.
Offset accounts
An offset account is, simply, a bank savings account that is attached to your
home loan. The money you place in this account offsets the interest
accumulated on your mortgage, and therefore reduces the amount of interest
that you have to pay. The offset account also functions like a normal savings
account, with the money being accessible by ATM and EFTPOS.
A 100% offset account means that the same interest is earned in the savings account as is paid in the mortgage account. So, generally speaking the only offset account worth having is a 100% offset account, although these are not available with all loans. Also loans with 100% offset accounts can be more expensive than loans that do not offer this feature, therefore it is important to compare and consider your options.
Extra repayments
If you make more than the required mortgage repayment then the amount of money
your interest is calculated on will decrease, and thus your loan will cost
less in the long term. This feature is extremely useful if you expect to be
earning excess money at any point during the loan.
Before choosing a home loan you should check whether extra repayments are allowed on that product as well as whether you will be charged extra fees for making them. If you expect to be making extra repayments you should look for a loan which does not penalise extra repayments.
Interest only payments
Interest only means you are only required to pay back the interest accrued on
your loan, rather than paying both the interest and the principal (that is,
the amount you borrowed.) At the end of the loan - or the end of the interest
only period - you are then expected to start paying back the principal (or pay
it back in full depending on the loan.)
Interest only loans are generally only available for an initial period of 3-5
years but can be refinanced for another interest only period down the track.
These loans keep your repayments down for the
interest only period, allowing you to invest your money in other areas.
Interest only option is not available with all loans. Some of the low deposit
home loans require that the borrower repays both principal and interest.
Portable Home Loan
Allows you to take an existing loan to a different property when you move.
This can offer savings on Mortgage Stamp Duty.
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.
Professional Package
Professional packages are generally only available through banks and only 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.
Professional packages may come with additional
loan features, however here again the borrower should consider whether the
feature is beneficial for their needs.
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