Home Loan Features to Give you Flexibility
The Australian dream has never been bigger. Homeownership remains at its core, but us Australians want it all: travel, great job, healthy lifestyle and time well spent with family. And why shouldn’t we dream big? We just need the right home loan to match.
Finding the right home loan doesn’t just mean finding the lowest interest rate. While a low-interest rate is always helpful, home buyers should also pay close attention to home loan features. Home loan features have the power to save you thousands of dollars, especially if you require a little flexibility to live the Australian dream!
Imagine you receive a nice little tax return, a bonus or higher salary. If you put the extra funds towards your home loan, you can cut down your principal, reduce future interest payments and you will be one step closer to paying off your home loan early.
It may sound crazy, but not all home loans will allow you to do this. Making extra repayments over and above your regular home loan repayments is actually a home loan feature. Without this feature, you may incur a fee to make extra repayments or you may not be able to make extra repayments at all.
For most Australians, the flexibility to make extra repayments is highly valuable, especially when you consider the average Australian changes jobs every 3.3 years and many work toward bonus incentives from employers. Making even small extra repayments can make a big difference to the amount of interest your pay and the term of your loan.
Extra repayments and a redraw facility are a complementary pair. If you’ve been working hard, chipping away at your home loan and making extra repayments, a redraw facility gives you the flexibility to draw on those extra repayments if you require to at a later stage.
The future is unpredictable, and you don’t always know when you may need additional funds. A redraw facility ensures your finances aren’t completely trapped in your mortgage and you can access funds when you need them. A redraw facility gives you the flexibility to renovate, pay for a wedding, plan a holiday or simply cover the bills if your financial situation changes.
An offset account is the ‘crème de la crème’ of flexible home loan features. An offset account works just like an everyday transaction account:
- Have your salary paid into your offset account
- Pay your bills from the account
- Use it for your everyday expenses
The big draw to an offset account is the added bonus of reducing interest on your home loan. This is because all funds in the offset account are used to offset the principle on your home loan.
For example, if a borrower has a home loan of $300,000 and $80,000 in an offset account they will only pay interest on $220,000. The great thing about an offset account is that it gives borrowers the flexibility to access their money when they need it, with the added benefit of reducing the interest payable on their home loan.
You don’t need to arrange to make an extra repayment or redraw, simply deposit and withdraw money from your offset account as if it was your own savings account. This home loan feature is perfect for Australians who want to own their own home, but still maintain the flexibility to travel, start a family or renovate.
Home Loan Portability
Changing home loans isn’t always easy or cheap! Break fees and start-up fees can quickly add up, but for many, moving house is a part of life. Locking into a home loan doesn’t mean you have to be locked into the same house. If you want the freedom to move house without the hassle of changing your entire home loan, then look for home loan portability. This home loan feature allows you to take your home loan with you when you move, giving you the freedom to move about without the fees or the added paperwork.
It sounds too good to be true, a repayment holiday? Yes, this is a real home loan feature, which essentially allows you to take a break from home loan repayments. A repayment holiday can only be taken for a short time, generally, up to 6 months, which is especially helpful if you are transitioning between jobs, need to take some time off or you are starting a family.
In most cases, a lender will impose strict eligibility criteria on a repayment holiday and is usually only available to you if you have made extra repayments, but home loans are a long term commitment and the flexibility to take a short break can provide much-needed relief, 15 or 20 years down the track.
At Mortgage House, we’re no strangers to the homeowner’s journey. It’s a long (but rewarding) one. If you’re thinking of buying a home, you can contact us for information about the best flexible options for you when it comes to your mortgage. Apply Online today to get started.