Modern-day mortgages have a seemingly endless array of features designed to help you manage your loan and pay it off faster than the standard 30-year term.

Most Australians have very little understanding of how these features work and which ones would be helpful for them.

Our mortgage brokers will help you to choose the right loan features and, consequently, a loan product as part of their Preliminary Assessment.

This page is designed to help you to understand what these features mean and how they can help you.

Redraw

Home loan redraw gives you the power to withdraw any additional repayments that were made on top of the minimum loan repayment.

For example, if you had been making an additional repayment of $200 on a monthly basis, then after a year, you will be able to redraw $2,400. In effect, any additional payments you have made can be accessed when you need them.

This is a great way to keep funds on standby or to save for a holiday or car in your loan account rather than in your savings account.

However, please be advised that some lenders may charge a fee for a loan redraw, and in the case of fixed -ate loans, a redraw is often not available.

Extra Repayments

With this feature, you have the ability to make extra repayments on your loan on top of the minimum repayment amount.

Extra repayments can be made on a regular basis by changing the amount that the banks direct debit from your account. Alternatively, you can make extra repayments on an irregular basis by transferring in money whenever you have it available.

Please note that for fixed-rate loans, extra repayments are often not available.

Professional Package Discounts

A professional package is where you pay one annual fee in return for discounts on a range of products and services from your lender. In most cases you can receive the following benefits:

• Waived application fee.
• Waived monthly fee on your loan.
• Waived valuation fee.
• Interest rate discounts (2-2.5 percentage points on variable rates and 0.1-0.2 percentage points on fixed rates, depending on the lender, loan size and market).
• Waived monthly fee for your cheque account.
• Waived annual fee for a credit card with rewards.
• Discounted insurance products.
• Special service / higher level of service from the bank.

In most cases, a professional package is suitable for large loans (>$250,000) and is almost always used when we negotiate a special discount for customers borrowing over $1,000,000. They can also be suitable for people who have multiple products with the one bank.

Interest Only

During an interest only period on a loan, you will just pay the interest due each month and not any of the principal itself. The benefit of doing this is that you keep your repayments to an absolute minimum. However you will not pay off the loan unless you make extra repayments. Interest only periods are usually for up to 5 years, however some lenders will consider 10 years.

Salary Crediting

This feature allows you to have your salary paid directly into your loan account. This is most commonly used for people with Line of Credit loans or who are salary-sacrificing their home loan.

Loan Portability

With loan portability, you can move your loan onto another property. Normally this is used when you sell your home and buy a new home. In most cases, for this to work, the settlements must occur on the same day. This can avoid the need to apply for a new home loan when you move house.

Repayment Holiday

A repayment holiday can be used if your circumstances change. Normally, this is due to the arrival of a new baby, and consequently, a reduction in income for your family due to taking time off for maternity leave. Typically, you can reduce or avoid making repayments for up to six months, during which time the interest adds to your loan.

When you return to work, you can then restart your repayments and eventually increase your repayments to catch up to where you were before.

Loan Splitting

This feature allows your loan to have multiple loan accounts. The most common use of this is for people to set up a loan as half fixed, half variable. This allows them to make extra repayments on the variable portion, however, to partially protect themselves from rising interest rates.

You can also use multiple loan accounts to keep track of loans used for different purposes. For example, if you buy shares and use your home as security. You can have a separate account for this purpose so that you can show the tax office which part of your loan is tax deductible.

100% Offset Account

• Linking to your home loan: You can get an offset account at the same bank where you get your home loan. They are linked together.
• Offsetting your loan: The money you have in your offset account is used to “offset” or reduce the amount remaining on your home loan on which you have to pay interest. So, if you have $10,000 in your offset account and your home loan is $300,000, you pay interest only on $290,000 ($300,000 – $10,000).
• Reducing interest: Because you’re paying interest on a smaller amount, you pay less interest. This can save you a lot of money and help you pay off your home loan faster.
• Easy access: You can still use the money in your offset account for your daily expenses, just like a regular bank account. You can deposit your salary there, pay bills, and use a debit card linked to the account.
• Tax benefits: In some cases, having an offset account can also have tax benefits, especially if you have an investment property.

We have covered this in more detail on our 100% offset account page.

Partial Offset

A partial offset is when only a portion of the funds in your offset account are used to offset your home loan balance. In other words, not the entire balance in the offset account is counted against your loan. For example, if you have a $500,000 home loan and $100,000 in your offset account, and your lender offers a 50% partial offset, you would pay interest on $450,000 of your home loan, not $400,000.

Line Of Credit (LOC)

A Line of Credit home loan is a feature that allows homeowners to access funds up to a certain credit limit, similar to a credit card. The borrower can draw on the LOC as needed and pay interest only on the amount borrowed, not on the entire credit line. The key features include:

• Flexibility: Borrowers can withdraw money up to their approved limit whenever they need it.
• Interest Payments: Interest is typically only charged on the amount of money actually used, not the entire credit limit.
• Repayment Options: Borrowers have flexible repayment options, and they can make interest-only payments or pay off the principal at their discretion.
• Security: The home itself often serves as collateral for the Line of Credit loan.

We have covered this in more detail on our Line of Credit page.

Loan Variation

• Change the interest rate from variable to fixed or interest-only payments.
• Extend the loan term.
• Change the loan’s security property.
• Add or remove partners or guarantors from the loan agreement.
• Cash out equity or increase the loan amount.
• Transition the property’s use from owner-occupied to an investment property.
• Move from a low-doc to a full-doc loan.

We have covered this in more detail on our Line of Credit page.

Rate Lock

A rate lock agreement between a borrower and a lender allows borrowers to secure a specific interest rate for a predetermined period, typically ranging from 15 to 60 days. This rate remains unchanged, even if market interest rates fluctuate during the locked period, providing borrowers with stability and predictability in their mortgage payments.

The lender will usually charge a rate lock fee of up to 0.20% of the loan amount, but there are some lenders that offer free rate lock for up to 60 days. Visit our rate lock page for more detailed information.

We have covered this in more detail on our Line of Credit page.

Find Out More

Our mortgage brokers are passionate about helping you make the right choices with your home loan. If you aren’t sure which loan features you need or need more information about other loan features not listed here, then please contact us and we’ll help you to decide.