BASIC HOME LOAN
This is a ‘no frills’ product that offers a very low variable interest rate with little or no regular fees. For instance, Suncorp has “Back to Basics” product and Macquarie has “Basic Home Loan”.
PACKAGED HOME LOANS
A way of packaging a loan with extra benefits such as interest rate discounts, lower fees and discounts on other bank products. The ‘package’ often provides much better value for money than traditional ‘no frills’ loans.
Generally, you’ll be eligible for professional package home loans if you’re borrowing more than $150,000 and earn more than $50,000 per annum.
For instance a Home Loan with a credit card such as CBA’s MAV Package or ANZ’s Breakfree Package.
If you’re in a position to pay a little bit extra into your mortgage, a redraw facility might work well for you. Loans with a redraw facility allow you to:
- Deposit extra money into your mortgage
- Put money in regularly or just now and again
- Withdraw that extra money out again whenever you need it.
Over time these extra deposits can greatly reduce your interest payments and the life of your loan.
Some lenders charge a fee to activate this feature and/or a fee each time you redraw, so you need to take these costs into consideration.
With an Offset Account, your income is paid into an account linked to your home loan that you can use for all your:
- Cheque transactions
- Internet banking
- Credit transactions
An Offset Account is a deposit account linked to the loan, the benefit is that any surplus funds that you might have, can be deposited into the deposit account and this is offset against the loan it is linked to. For example, if the loan amount outstanding is $100,000 and there is $5,000 in the offset account the interest that is charged on the loan will be calculated on $95,000. The effect this has is that the home loan gets paid out at a faster rate because your standard monthly repayment has been calculated on the full amount outstanding. Offset Account loans vary in the amount that is offset, meaning that some lenders may offset only 50% of the funds held in the account whilst others offset the full 100%, so you need to pay attention to ensure you get the best loan for your needs.
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