A home loan isn’t just about the interest rate, its the features attached to it determine how much control you have over your money.
Lenders package their products with different mechanisms designed to help you save interest, access cash, or pay down debt faster. We’ve broken down the most common loan features below so you can see exactly how they work and which ones actually align with your day-to-day cash flow strategy.
This is an account linked to your home loan. Money paid into the account is deducted from the balance of your home loan before interest is calculated. This is a great way to reduce your loan interest. Be aware the account may have higher monthly fees or require a minimum balance or have other restrictions.
This typically allows you to access any extra repayments you have made. Knowing you have access to funds can provide peace of mind. Be aware lenders may charge a redraw fee and have a minimum redraw amount. There might also be other restrictions on when funds can be redrawn.
This combines a home loan with a cheque, savings and credit card account. You can have your salary paid into it directly. By keeping cash in the account for as long as possible each month you can reduce the interest charges. Used with discipline, the all-in-one feature offers both flexibility and interest savings. Interest rates charged for these loans can be higher.
Home loans over a certain value are offered at a discounted rate, combined with discounted fees on other banking services. These can be attractively priced, but if you don’t use the banking services you may be better off with a basic variable loan.
If you pay more than the required regular repayment, the extra amount may be deducted from the principal. This not only reduces the amount you owe but lowers the amount of interest you repay. Making extra repayments regularly, even small ones, is the best way to pay off your home loan quicker and save on interest charges.
Instead of a regular monthly repayment, you pay off your home loan weekly or fortnightly. This can suit people who are paid on a weekly or fortnightly basis and will save you money because you end up making more payments in a year, which potentially cuts the life of the loan.
You only pay the interest on the loan, not the principal, usually for the first one to five years although some lenders offer longer terms. Some lenders give borrowers the option of a further interest-only period. Because you’re not paying off the principal, your monthly repayments are lower.
You only pay the interest on the loan, not the principal, usually for the first one to five years although some lenders offer longer terms. Some lenders give borrowers the option of a further interest-only period. Because you’re not paying off the principal, your monthly repayments are lower.
You may be able to take a complete break from repayments, or make reduced repayments, for an agreed period of time.
Your lender automatically draws repayments from a chosen bank account. Apart from ensuring there is enough cash in the account, you don’t have to remember to make repayments.