When it comes to a life goal as significant as buying a home, a home loan is a tool that benefits countless Australian borrowers.
Home loans can often be complex to navigate, with plenty of bells and whistles designed to attract curious customers. Yet a lot of the time, these bells and whistles don’t actually save you any money and are superficial in nature. There’s no “one-size-fits-all” solution for every customer, so it pays to do the research and find out what deals will help you the most!
The good news is that aside from low home loan rates, there’s plenty of worthwhile benefits available to make the most of your loan terms.
In this article, we’ve whittled down the top four home loan features you should be taking advantage of (and making the most of your mortgage with):
1. Split home loans
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 can opt to split their home loan, as it grants them the best of both variable and fixed loan benefits.
A fixed rate loan provides you with cash flow certainty and the assurance that if interest rates are to rise for any reason, your loan would be protected from sudden rate surges. A variable rate home loan typically gives you the flexibility to make additional unlimited repayments or change your repayment frequency. You can choose to split your home loan however you want, in whatever ratio works best for you! Find out more with our Split Loan Calculator.
2. An offset account
An offset account is linked to your home loan and allows you to deposit and withdraw funds, just as you would a transaction account. The main difference between an offset account and a typical transaction account is the balance of the offset account is measured against the balance of your home loan when interest is calculated.
Having an offset account reduces the overall amount of interest you are charged, effectively reducing the term of your loan and potentially saving you thousands of dollars over time. It reduces your interest payable on the value of your loan – as interest is only charged on the net balance (your mortgage balance, less your offset account balance).
3. Extra repayments
Making additional repayments on your home loan can be a great way to pay it the value of your loan off faster and potentially save you thousands of dollars in interest over the long term. Whether it’s $200 extra a month or a one-off lump sum, making extra loan repayments is something any home loan borrower 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.
Homestar customers can make extra repayments either by increasing their direct debit repayment, their salary credit amount or one-off amounts, via our online banking platform – for no extra cost. We don’t charge customers for making extra payments on any of our variable rate accounts. Our fixed rate loans, however, have a maximum repayment amount of $20,000 per year.
4. Redraw facilities
A redraw facility is a facility where you can withdraw money from your loan account if you have made extra repayments to your home loan. The biggest benefit of having a redraw facility is that the additional repayments can reduce the interest you pay.
Your extra repayments are pooled together and are separate from your minimum monthly repayments to make them available for withdrawal, and you can withdraw them easily when you need them.
For example, if your minimum monthly repayments are $2,000 and in one month you repaid $5,000, you could choose to withdraw this $3,000 for your own use. There are no restrictions on what you can use redraw funds for, but people can often use them to pay off debt, fund renovations, plan holidays, or fund a major event. It’s worth noting that funds in redraw accounts isn’t as immediately accessible as money in offset accounts (as the money technically belongs to the lender). In some cases, same-day withdrawal might not be available.
If you’d like to take advantage of some of the great home loan features and benefits we offer, you can reach out to our Loan Specialist Team on 1300 462 209.
Disclaimer: This article is not intended as legal, financial or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature you should seek advice from a qualified and registered Australian legal practitioner or financial or investment advisor.