Home loans have come a long way in the past few decades, and now there are a range of features you can access that can really benefit you in the long run. Fortunately, there are a few key features that you need to know about that can make all the difference and potentially save you thousands of dollars over the life of the loan.
An offset account is one of the most common features of a standard variable home loan, and it’s also one of the most effective. An offset account is like a transaction account that works in conjunction with your home loan. You effectively save interest on money that you have sitting in your offset account, while still retaining full access to it, as you would with the account you use for everyday purchases or even your savings account. While there are different types of offset accounts, a 100% offset can be the most beneficial for some, as it saves you the same rate of interest that you’re paying on the home loan.
Unlimited Additional Repayments
If your goal is to pay down the balance of your home loan as soon as possible, you’re going to want to be able to make frequent repayments over and above the minimum requirements. Some home loans don’t allow you to do this or have a cap on the additional amount you can repay. Fortunately, there are plenty of products that do offer unlimited additional repayments, and this can save you both fees and interest over the long term.
If you’re unsure as to whether you should be fixing your home loan, the good thing is, it is possible to have the best of both worlds with a split home loan. As the name suggests, this type of loan allows you to split the loan between variable and fixed interest, so there is a degree of certainty around your repayments while still having some level of flexibility that comes with the variable loan.
If you’re someone who is likely going to be paying back your loan faster than the term dictates, a redraw facility might be something to consider. In essence, a redraw facility is very similar to an offset account, in that you have access to all the money you repay over and above the minimum. If you don’t need access to those extra funds, but want to have the money there for a rainy day or an emergency, then a redraw facility is a very effective option.
If you have a range of different loans, such as car, personal and home loans, then it is possible to package them all together. By doing this, you will likely be able to get lower interest rates and also save on the fees you would pay should you elect to take them out separately. The main catch with a package deal is that you are a little more tied to that one lender than you might be otherwise. It’s always a good idea to review your loans regularly with your mortgage broker.