Home Loan Features
The following shows the features that are available on different types of home loans. They can give you the flexibility to reduce the term of your loan, so you end up paying less. They also make it easier to access the money you have invested in your property, so you can use it when you need it. Together they let you choose how you want to manage your money and how fast you want to repay your loan.
Most home loan repayments are calculated on a monthly basis. Some however give you the option to repay your loan weekly or fortnightly. So you have the ability to pay more off your home loan - which means you own your home loan sooner.
Many people are reluctant to pay extra off their home loan in case they need that money again in the future. With a redraw facility you can pay off extra, saving interest, secure in the knowledge that the extra money you've put into your loan is still available if you need it.
Interest Only Option
Some borrowers may only want to repay the interest due on their loan and not repay the capital. This is particularly attractive to investors.
Interest Offset Facility
This is an option to offset the interest calculated on your savings against the interest payable on your home loan. The benefit is that instead of paying tax on the interest calculated on your savings, this interest is offset against the interest payable on your home loan.
Some lenders offer additional benefits to home loan customers, such as a savings account that is free of transaction fees, or other finance and general benefits.
Fixed Rate Loans
With a fixed interest rate you know exactly what the interest rate charged on your loan will be for a fixed term. This is usually between one and five years. The interest rate you fix will vary depending on the term you choose and the economic circumstances at that time. Longer terms usually have higher rates.
Advantages are that if interest rates suddenly increase you have the peace of mind that comes from knowing that the interest on your loan won't go up. Also, a fixed rate loan lets you budget with certainty, knowing exactly what your payments will be for the full length of the loan.
Disadvantages are that if rates drop you won't benefit from the fall. Many fixed rate loans are also inflexible as they often they don't allow you to pay in extra, or redraw any additional payments you've made.
You should also be aware that with almost all fixed rate loans there are penalty costs (also known as 'break costs') if you want to change your loan within its term. You should find out what these are before you commit, as they can be high.