Home Loan Features: Which Ones Are Suitable For You?

Modern day mortgages have a seemingly endless array for features designed to help you manage your loan and pay it off faster than the standard 30 year term.

Most Australians have very little understanding of how these features work and which ones would be helpful for them.

Our Mortgage Brokers will help you to choose the right loan features and consequently a loan product as part of their Preliminary Assessment.

This page is designed to help you to understand what these features mean and how they can help you.

Generally, home loan features are about cost, convenience and flexibility. Depending on your plans and your lifestyle, some of them could save you money.

 

FLEXIBLE RATE OPTIONS

Switching your loan between a variable rate and fixed rate, or splitting your loan between the two helps you manage your mortgage in line with interest rate movements.

 

ADDITIONAL REPAYMENTS

The option to pay a little extra off your loan when you have some spare cash helps you cut time and money from your loan.

 

REDRAW FACILITY

Lets you withdraw any extra repayments that are in excess of your regular repayment schedule. A redraw account can be very effective if you foresee changed circumstances – for instance, you can make additional payments toward your loan while you have the capacity in preparation for a time when this capacity may reduce. For instance, if you are expecting a child, you could accelerate your payments via this facility during the pregnancy and then draw down on the excess once the baby has arrived.

However, we do not recommend redraw facilities for investment properties as this can complicate your taxation affairs. What we mean by this is that you can’t take the funds out of an investment account and go on a holiday, let’s say which is personal, and still claim the tax advantage of this. The ATO will rule against this as being deductible, and this is why we recommend against a redraw facility for investment loan products.

 

REPAYMENT HOLIDAY

Repayment holidays are offered by some lenders, allowing you to take full or partial periods off your mortgage repayments. This may reduce the pressure on borrowers whose finances are stretched through difficult circumstances such as unemployment or maternity.

 

DIRECT SALARY CREDITING

Salary credit permits you to direct your salary into your home loan account, reducing the principal owed. As interest is calculated daily, this salary credit will reduce the interest paid and is particularly useful for couples with second salaries. It is also a convenient way to make your loan repayments.

 

OFFSET ACCOUNT

An offset account is a transaction account that can be linked to your home or investment loan. The credit balance of your transaction account is offset daily against your outstanding loan balance, reducing the interest payable on that loan.

The funds are always available and yet, they are while they sit in your offset account

The funds are always available and yet, they reduce the interest accruing on your mortgage as they sit in your offset account.

 

TOP UP

A loan top up allows the borrower to increase the limit on their existing loan, without having to acquire additional finance through other sources.

 

LOAN PORTABILITY

The ability to take your loan with you when you move can make life a lot easier, and help save on fees further down the track.

 

And after all that, would you like to know the number one advantage for securing a home loan? Well we’re proud to report that statistically, home owners advise it’s working with a Mortgage Broker! With hundreds of home loan types, features & options available, it saves to have an expert on your side. Tell us a bit about yourself and we’ll match you with the right loan to help you get approved faster.