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Helpful Info - Home Loan Features

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** This information is provided as information only and does not constitute advice or opinion.

There are lots feature and benefits to consider when you're choosing a suitable home loan.

Your SJButler Mortgage Adviser will assist in this regard however as we have highlighted the most important consideration is the level of borrowings.

The most comprehensive or cheapest loan available in the market will not assist you if you have over borrowed. It's not just about the loan.

100% Offset Account

A 100% offset account is a savings account linked to a loan account. No interest is paid on the offset account but instead the balance of your offset account is deducted from your loan account before the interest on your home loan is calculated. Therefore less interest is charged to your loan.

Usual features

  • Interest paid on savings accounts is taxable, but because your offset account balance is used instead to reduce your loan principal amount and thereby your interest charged, no tax is payable, so you are also reducing your tax bill.
  • The interest rate on your offset account is the same as that applied to your loan account. 
  • This is a great rate and is much higher than you could earn on most savings accounts. 
  • The interest rate moves with your loan account rate ensuring you get maximum benefit from every dollar in your offset account.

Things to look out for

  • You may have higher monthly fees attached to the account.
  • You may need a minimum balance in the account to benefit.

The all in one Loan

This is a loan account that acts as a combined mortgage, savings and cheque account. You have a central mortgage account into which your salary and any other cash payments are deposited. The extra cash in your account reduces the principal amount owing and thereby the amount of interest charged. You then access the funds you have left over and above the minimum monthly repayment amount to pay monthly expenses.

These accounts often have a credit card linked to them, with the balance owing on the card at the end of each month being drawn down from the all-in-one account. Standard transactions such as ATM withdrawals and direct debits are also managed through the account so that many borrowers will not need another bank account. This can be an effective way of using the interest-free period on your credit card each month.

Usual features

  • Offers flexibility.
  • May be tax effective.
  • Can result in interest savings if used with discipline.

Things to look out for

  • Higher interest rate than some other products.

The Professional Package

Professional packages are generally only available on home loan amounts over a certain value. Usually, the greater the loan amount the more likely the lender will be to offer additional discounting on the interest rate.

Usual features

  • Interest rate discount.
  • May include discounts on other banking products.

Things to look out for

  • Borrower may not need the additional services offered.
  • Borrower may be financially better off with a basic variable loan.

Additional Repayments

These are payments that you make which are above the standard repayment for your loan. As an example, a $300,000 loan with a 7% interest rate requires a monthly repayment of, say, $2,120. If you want to pay the loan off quickly and reduce the interest bill, you might make monthly payments of $2,500, which would include an extra repayment of $380 thus reducing the term of your loan.

Direct Salary Credit

Direct Salary credit allows for your salary to be paid directly into your home loan account. This is an advantage if you are not a disciplined saver.

Loan Portability

Loan portability allows you to take an existing loan to a different property when you move. (This saves you on Mortgage Stamp Duty).

Offset Account

This is a separate account that is attached to a loan account. The balance of the offset account is deducted from the balance owing on the loan account when calculating the daily interest charge. For example, a borrower with a $300,000 mortgage and $20,000 in an offset account will only be charged interest on $280,000 and not $300,000. Some products do not offer 100% offset, while others may require a minimum balance in the offset account before the offset applies.

Redraw Facility

A redraw facility allows borrowers to access extra repayments that have been made by them. This money can then be used for a variety of purposes including a holiday, furniture or car. Some lenders have a minimum redraw amount and may also charge a fee per redraw.

Repayment Holiday

This feature offers a complete holiday from repayments or a period of reduced repayments. This can be especially useful during career changes or breaks such as maternity leave.

Switched to Fixed Rate

Switching to fixed rate allows the borrower to switch from a variable to a fixed rate loan.

Top-Up

Top up accounts allow borrowers to increase the limit on a home loan, using the equity in their property for other needs (e.g. renovations).