Understanding Home Loan Features

Examples of common home loan features include rate switching, extra repayments, offset accounts, redraw facilities and interest only payment options. Each of these features can influence your home loan decision, and depending upon how features are utilised, alter both the amount of interest paid as well as the time it will take to repay a loan.

It is worthwhile getting a basic understanding of these features and then discussing with an experienced broker which features might best suit your circumstances. Email or call today for more information.

Rate Switching Feature

Perhaps the most basic of home loan features is a switching feature that enables you to switch from a variable to a fixed rate of interest and vice versa. A switching feature can be a good option if you think rates are going to move quickly up or down during the term of a loan.

Extra Repayments

Making extra repayments during the course of a home loan will reduce the balance of the loan on which interest is calculated, saving interest and reducing the term of the loan.

The ability to make extra repayments usually attracts a fee so if you think that this is a feature you will need, a loan with the lowest extra repayment fees should be sourced.

Offset Accounts

An offset account is a savings account attached to a home loan. The balance in the savings account "offsets" or reduces the overall balance of the home loan, reducing the amount of interest payable. The offset savings account functions like a standard savings account, with funds accessible through ATM's and by EFTPOS.

Redraw Facility

A redraw facility firstly allows extra repayments to be made on a home loan and secondly, allows the amount of any extra repayments to be withdrawn if required. This type of feature allows you to save interest whilst at the same time enjoying the added flexibility and security of having access to your money if necessary.

Fees normally apply when a redraw facility is activated, and minimum redraw amounts can apply, so it is worth fully investigating the fine print before deciding on this loan option.

Interest Only Loans

Interest only means just that. Rather than paying the interest and repaying the loan principal (or the amount borrowed) during the course of the loan, only accrued interest is payable. Principal is then repaid at the end of the loan term.

Interest only loans enable repayments to be minimised for the interest only period, allowing you to do other things with your money.