Published at: 6/21/2016 3:28:57 PM
We look at loan features that you could ditch – and those you could hang onto – to save money.
We all want a good value home loan with a great rate. But sometimes the rate can be bumped up because the loan is jam-packed with features.
That’s not necessarily a bad thing – if you want all the bells and whistles. However, as with any purchase, the key is to only pay for loan features you’re likely to use. A basic home loan ca often do the job just as well at a lower rate.
Let’s take a look at which features are essential and which are a nice-but-not-necessary extra.
Fee-free extra repayments
This one’s important. Making extra payments on your home loan is a proven way to pay off the loan sooner. But you shouldn’t be penalised for getting ahead with your loan. Look for a loan that allows fee-free, unlimited additional repayments.
Being able to withdraw extra repayments back out of your loan is very reassuring. The cash is available if you need it in an emergency, and that’s a great incentive to tuck more into your loan to pay it off sooner. What to look for? Fee-free redraw - because you shouldn’t pay to access your own money.
An offset is an account linked to your home loan. The balance of the account is deducted from the balance of your loan when monthly interest is calculated so it can be a useful way of using spare cash to help pay off your home loan.
The downside is that offset home loans can come with a higher rate. Unless you have reasonable savings to hold in the offset account you could be better off using a basic loan. Keep an eye out for 100% offset. It means the full value of your linked account is helping you save on interest.
Don’t get caught with a one-size-fits-all 25-year term. If you want to pay off the loan sooner and save on interest, opt for a shorter term. ME home loans let you choose your term – anywhere from 5 years to 30 years.
The vast majority of Australian home owners choose a variable rather than fixed rate home loan. But if you’re unsure which way to go, look for a loan that lets you split between fixed and variable rate components. It provides the flexibility of a variable rate and the certainty of a fixed rate.
Instead of taking a stab at the loan features you may use, it pays to talk to an expert. An ME mobile banker can help you decide what’s a must-have and which features you could probably live without. It’s a smart way to only pay for what you really need.
Terms, conditions, fees and charges apply. Applications are subject to credit approval.
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