So, you’ve decided it’s time to look at owning your home. Congratulations!
Let’s break down the different features you might encounter on your home loan journey, from variable interest rates to redraw facilities, in a language that won’t send you scrambling for a dictionary.
In very simple terms, the ‘best’ loan feature to have, is the feature or features that work for you, your situation and your goals.
Reach out to make an appt today to discuss which features might work best for you.
Variable Interest Rate: Picture this as a rollercoaster ride for your loan repayments. With a variable interest rate, your repayments can go up or down depending on changes in the market interest rates. It offers flexibility but also a bit of uncertainty.
Fixed Interest Rate: If you’re more of a steady-eddy who likes to know exactly what’s coming, a fixed interest rate might suit you better. Your interest rate stays the same for a set period, offering predictability in your repayments. Just be aware that if market rates drop, you might miss out on potential savings.
Split Loan (Variable and Fixed): Why choose between the two when you can have the best of both worlds? With a split loan, you can divide your loan amount into portions, some with a fixed rate and others with a variable rate. It’s like having your cake and eating it too, providing a balance of stability and flexibility.
Loan Portability: Portability allows you to move your home loan product/account from one property to another without having to close (refinance) the current one and apply for a new one. If you’re looking to sell and buy another property to live in, this may be a more cost-effective way to do it, particularly if you have a fixed low-interest rate.
Principal and Interest Repayments: This is your bread-and-butter repayment method. Each payment goes towards both the principal (the amount you borrowed) and the interest (the cost of borrowing). Over time, you chip away at your loan balance until it’s gone.
Interest Only Repayments: Picture this as a temporary reprieve from tackling the principal. With interest-only repayments, you only pay the interest charges for a set period, typically the first few years of your loan term. It can ease your immediate financial burden but remember, you’re not making a dent in the actual amount owed.
Extra Repayments: Now, here’s where you can turbocharge your journey to debt-free homeownership. Making extra repayments means exactly what it says – paying more than the minimum required each month. By doing this, you reduce the principal faster, which can save you a ton of money in interest over the life of the loan.
Redraw Facility: Think of this as your rainy-day fund nestled within your mortgage. If you’ve made extra repayments, a redraw facility allows you to dip into those additional funds if needed. It’s like having a secret stash of cash without needing a separate savings account.
Offset Facility: Ever heard the phrase “kill two birds with one stone”? That’s precisely what an offset account does. It’s a transaction account linked to your home loan, and the balance in this account is subtracted from your loan amount before interest is calculated. So, not only are you reducing your interest payments, but you still have access to your funds whenever you need them.
Package: Some larger lenders, offer a ‘home loan package product’ that can have a lower interest rate with some of the upfront fees waived but can incur an annual fee. Some lenders will also offer credit cards, insurance and/or other ‘perks’ when the home loan is taken up as a package.
Understanding these features can empower you to choose the right home loan for your needs. Remember, each option comes with its own set of pros and cons, so take your time, do your research, and don’t hesitate to book a time to discuss your situation.
Happy house hunting!
