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Home Loan products

Home Loan products

Home Loan Products & Options to Consider

When it comes time to select your home loan products, there are a few things to consider to ensure you are making a decision based on what will work best for you. Some of these options include:

  • Home loan repayment frequency
  • Basic home loan vs package home loan
  • Redraw vs offset accounts
  • Fixed rates, variable rates or both

Below we cover these different options as simply as possible to assist you in making a decision. If you are unsure of what would be most suitable for you, we can always assist you in making a decision or recommendation based on your goals and objectives.

Home loan repayment frequency

The short story is that if you want to reduce interest repayments over time and shorten your home loan term (i.e. from 30yrs to 27yrs) then you should make more frequent home loan repayments.

Interest on your home loan is calculated daily, so the more frequent the repayments, the lower the loan balance will be and the lower the interest repayment amount. If your lender of choice only offers monthly repayments, you can always divide the monthly amount up to a weekly figure and make that repayment.

For more information about home loan repayment frequency and how to reduce your home loan term, click here.

Basic home loan vs package home loan

A basic home loan product could be considered as 'no frills' as you generally get a loan facility and that is it. Typically there is no annual fee but there can be an establishment fee and a monthly fee. When we provide you with a home loan product comparison, all fees will be covered.

A package home loan product comes with a few more bells and whistles if that is something that would benefit you. The package product generally has an annual package fee, no monthly account keeping fee, includes an offset account and depending on the lender, there can be some other bonus products that are free (i.e. a credit card with rewards program).

Redraw vs offset account

These two items very much tie into the product selection above.

If you want a savings account that acts like a transactional account and can be nominated as your offset account, this would point you more towards a package home loan product. Some lenders offer one offset account, some offer multiple offset accounts, so if you manage your money with multiple bank accounts (e.g. savings account, holiday account, kids savings, etc.) then you may feel like having a lender with multiple offset accounts is important to you so that every dollar in the offset accounts can help reduce the interest component of your home loan repayment.

If you are happy to put all your savings onto the home loan, with the option to redraw it later, then a basic home loan product may be suitable. The main consideration for proceeding with a redraw facility is that most lenders do not have the functionality for a home loan account to act as a transactional account, so making scheduled, repayments, Bpay and general day to day transactions like a debit card is not available.

If the property is ever going to become an investment property, then an offset account is possibly the more suitable loan product to proceed with. Your accountant can confirm if this is most suitable however top level, by putting your savings into an offset account, you are not reducing your loan balance on a deductable liability (tax talk).

Some of our clients do not want to pay an annual fee, so they just proceed with a basic loan product and use the redraw option. Some clients want to have an offset (or multiple) so they can manage their finances and get the benefit of reducing interest repayments.

For more information about redraw facilities, click here and for more information about offset accounts, click here.

Fixed rates vs variable rates

Variable rate home loans go up and down based on the lender and Reserve Bank of Australia cash rate. Sometimes they go up, sometimes down but a variable home loan offers the most flexibility for additional repayments, refinance and loan payout without fees. If you make additional repayments onto the loan, you can also redraw the advanced payments.

A fixed rate home loan means you will be locked into the home loan rate at the time of settlement for the term selected. Therefore if rates go up or down, your fixed rate remains the same. You can exit a fixed rate home loan earlier than the agreed term however there can be 'break fees'.

If you want to hedge your bets, you can split your home loan to have the best of both worlds. For example, if the fixed rates are low and competitive, you might split your total loan up with 80% fixed and leave the other 20% as variable to you can offset the balance or make additional repayments with your savings.

This topic can be a hard one to decide, so if you are at all unsure, reach out to our team and we can discuss the current economic forecasts and make a recommendation for you.

For more information about fixed rate home loans vs variable rate home loans, click here.

Associations & Institutions we work with  
Bankwest Home Loans
Suncorp Home Loans
Newcastle Permanent
ANZ Home Loans
Citi Bank
PICA
CBA Home Loans
St George Home Loans
MFAA
AMP Loans
Pepper Money Home Loans
ING Home Loans
Essentials Home Loans
Connective
Virgin Money Home Loans
Macquarie Home Loans
NAB Home Loans