Home loan features explained
The interest rate isn't the only thing you should consider when looking for a home loan. Here are some home loan features you should know about.
When starting your home loan journey, there’s plenty more to consider than just the interest rate. There’s price, budget, and a number of home loan features that could help save you money and help manage the structure of your loan.
In this guide we’ll run you through some common home loan features you may want to consider in your search to find the right option for you.
Redraw facility
If you intend to make extra repayments on your home loan, a redraw facility allows you to dip into the payments you’ve made.
These extra repayments will accumulate separately to your normal repayments. Let’s say for example, your minimum monthly mortgage repayments are $2,000 and in one month you repay $5,000. You could withdraw the extra $3,000 whenever you like.
Some homeowners choose to redraw for expenses like:
- Paying down debts
- Funding renovations
- Paying for a holiday
- Funding a wedding
Keep in mind you can only withdraw the extra repayments you’ve made on your loan - not the minimum regular repayments.
Funds in a redraw facility are generally less accessible compared with funds in an offset sub-account. The funds may not be available for same-day withdrawal and you may be limited to a certain number of withdrawals per month.
At loans.com.au, you get the flexibility of accessing your redraw facility 24/7 by using our Smart Money app and an unlimited number of withdrawals with your redraw facility.
100% offset
A 100% offset sub-account is similar to an everyday bank account except that it’s linked to your home loan. Offset sub-accounts work by offsetting the money in the account against the balance of the home loan principal, so you only pay interest on the difference.
Unlimited additional repayments
Additional repayments are a feature of many home loans where you can pay extra on top of your regular minimum monthly repayments.
If your home loan allows you to make unlimited additional repayments, you can pay extra on your mortgage without being penalised.
All variable loans.com.au products offer unlimited additional repayments.
Loan splitting
Generally when you take out a home loan, you can choose between a fixed rate which is locked in for a set period of time, or a variable rate which can change with the market. However did you know it is possible to have the best of both worlds?
A split rate loan consists of both fixed and variable components, with one part fixed and the other variable. This option provides you with the security of a fixed rate on the fixed portion, whilst still offering the flexibility of a variable loan on the variable portion.
Interest-only
When you take out a home loan, you will eventually have to pay back the principal of the loan and the interest charged by the lender.
With an interest-only home loan, for an agreed period of time you will only pay the interest each month instead of the interest and principal. This means your monthly repayments will be lower during that period. This makes interest-only home loans popular for investors because they can claim the interest charged on their home loan at tax time.
Repayment schedule
In Australia, the standard home loan repayment schedule is monthly but many lenders allow you to make fortnightly and weekly repayments. Making more frequent repayments can also mean you’ll pay off more over a year.
For example, there are 26 fortnights in a year, so if your fortnightly repayments are $1,000 you’ll have paid off $26,000 by the end of the year. Comparatively, if you only made monthly repayments you would have only paid back $24,000 over the year.
Repayment holiday
Taking a repayment holiday means you are taking a break from making repayments on your home loan. Generally, repayment holidays are available for a short period, from a month up to 6 months and some lenders require you to have made some extra repayments on your home loan to be eligible for a repayment holiday.
Loan portability
Home loan portability allows you to keep the same home loan product, including the balance, interest rate, and any features such as offset or redraw, but change properties. This feature is most commonly used when you sell your existing home and buy a new home. In most cases for this to work the settlements must occur on the same day.
Technology
With many lenders enhancing their technology offerings to benefit the flexibility of the customer experience, it is worth noting the technological features your lender offers to apply for and manage your loan.
Our onTrack mobile app allows you to manage your home loan from application through to settlement while we do all the heavy lifting for you behind the scenes. You can use onTrack to book appointments with your lending specialist, upload, review and approve documents, and track the progress of your loan.
Smart Money provides access to a full range of account management functions once your loan has settled. Using this feature, you can view your account balances and transactions, transfer money, pay bills, send and receive messages from loans.com.au and query transactions.
Find out in under 2 minutes if you qualify for one of our low rate home loans.
About the article
As Australia's leading online lender, loans.com.au has been helping people into their dream homes and cars for more than 10 years. Our content is written and reviewed by experienced financial experts. The information we provide is general in nature and does not take into account your personal objectives or needs. If you'd like to chat to one of our lending specialists about a home or car loan, contact us on Live Chat or by calling 13 10 90.
