Some extras are worth it. What would frozen yoghurt be without popping pearls, chocolate fudge, cookie crumbs, strawberries, pretzels, gummy bears and tiny marshmallows? But you can have too much of a good thing. Maybe you would have been fine with vanilla froyo and a few peanuts – and now you’ve got an expensive mess.
The same is true of paying for extras on a home loan. A package that’s full of features can bump up your rate without giving you what you’ll actually use. It might not even be clear what’s included, or what the features are for.
A basic, good value home loan can often do the job just as well at a lower rate. If you’re not sure which home loan extras cost you money, our checklist will help you decide which are essential and which are chia seeds.
Fee-free extra repayments.
This is one of the best home loan features. Making extra payments on your home loan is a proven way to pay off the loan sooner. You shouldn’t be penalised for getting ahead on your loan, so look for one that allows fee-free, unlimited additional repayments without stinging you with hidden costs.
Look for: extra repayments with no fees.
Redraw from your extra payments.
Being able to withdraw from extra payments made on your loan means you can make them worry-free. The cash is available if you need it in an emergency, and that’s a great incentive to pay down your loan faster without leaving yourself short.
Look for: fee-free redraw – don’t pay to access your own money.
Access to an offset account.
If you’ve got savings or spare cash, an offset can help bring down the interest you’re paying. It’s an account linked to your home loan. The amount you’ve got stashed away is deducted from the balance of your loan when monthly interest is calculated, meaning you’re paying off your principle faster.
The downside is that offset home loans can come with a higher interest rate. If you don’t have a decent whack of savings to hold in the offset account, you could be better off using a basic loan and a high-interest savings account.
Look for: a 100% offset account, so the full value is saving you interest.
Flexible term lengths.
In the old days, 25-year mortgages were standard across the board. Fortunately now the length range is as diverse as froyo toppings. Don’t get caught with a one-size-fits-all term length. If you want to pay off the loan sooner and save on interest, opt for a shorter term with a higher monthly payment. ME home loans let you choose the length you want – anywhere from 5 years to 30 years. Look for: a home loan term that suits your budget.
Variable, fixed or split?
The vast majority of Australian home owners choose a variable rather than fixed-rate home loan. But if you’re not sure which option will be best for you, look for one that lets you split between fixed and variable rate components. You’ll get the flexibility of a variable rate and the certainty of a fixed rate.
Look for: a loan that lets you split between fixed and variable rates.
Don’t waste time guessing about extras. A ME mobile banker can help you decide which home loan features are a must-have and what toppings leave a bitter taste in your mouth. Talk to an expert and you’ll only pay for what you really need.
This article is prepared based on general information. It does not take into account individual financial objectives or needs and is not financial product advice.