LOAN FEATURES

Too many features–bells and whistles–can be costly so be careful when choosing a home loan product. Choosing the right home loan features or options, along with the best interest rates, will help you save money and enable you to pay off your mortgage quickly which could save you thousands of dollars.

A mortgage product is similar to other financial products when it comes to features. Take for example home insurance. Every feature you include will affect the premium you pay. The same applies to home loans. For instance, a variable loan which allows you to redraw against extra repayments or offset savings against the mortgage will often have a higher rate compared to a basic loan. Still, this might be the loan that represents the optimal solution if you need flexibility.

Some essential features to consider:

Professional Package

Professional packages are based on certain values. The bigger the loan amount, the more likely it is for the lender to offer discounts on interest rates.


Advantages:

• Discount on interest rates as well as other products
• No monthly account fees

Disadvantages:

• Borrower might not necessarily need these features

All in One Home Loan

This type of loan account serves as a combination of savings account, cheque account and combined mortgage. Your wages are deposited directly into your mortgage. The amount of interest is reduced by the extra cash in the account.


Advantages:

• Flexible and convenient
• Proper utilization can lead to interest savings
• Tax effective

Disadvantages:

• Generally higher interest rate
• Higher entry fees and ongoing fees

Offset Account

An offset account serves as a savings account for a loan. But instead of earning interest, the funds in the offset account are offset against the remaining loan balance, effectively lowering the cost of interest.

Additional Repayments

If you have money stored in a savings account, think about investing it in your mortgage–you’ll be better off financially. Most standard variable loans allow you to take back those extra payments via redraw facilities if needed.

Redraw facility

This feature allows you to access the additional repayments you made into your home loan account.

Portable loan

A portable home loan allows you to take an existing loan to another property without having to pay out your existing loan. This can save application and legal fees.

Top-up

This feature allows a borrower to further increase his home loan limit with the equity of the property used for renovations and other needs.

Fixed Rate Switch

This enables the borrower to switch from a variable rate home loan to a fixed rate home loan.

Repayment Holiday

With this feature, the borrower is allowed a term with reduced payments or a holiday from home loan repayments.