Will I benefit from frequent flyer points?
A home loan with reward points allows you to earn frequent flyer points with select airline providers.
Call it a gimmick but it can be a great way to go on a cheap holiday. However, the savings you can make depends on the amount you’re borrowing and your lifestyle.
You may often find that you’re better off negotiating for a lower interest rate.
Current special offers
Some of our lenders only offer home loans with reward points to borrowers wanting to buy a house to live in or an owner-occupied property.
However, some lenders offer points and cash back incentives to investors as well.
One of our lenders is currently offering 250,000 frequent flyer points or a $1,500 cash back on their home loans and investment loans if you bundle it with other products.
- Your minimum loan amount must be $250,000 (excludes line of credit).
- You must have a credit card with the bank and you’ll be required to make a purchase within 30 days of settlement.
- You must also have a transaction account with the bank and you’ll need to make a salary or equivalent income credit deposit into the account within 30 days.
- Conditions vary depending on whether you choose the cash back or the frequent flyer points.
Call us on 1300 889 743 or complete our online enquiry form and we can let you know if you qualify.
For balances over $150,000, one of our lenders is offering 150 reward points for every $1,000 on your mortgage balance per year.
This will be credited to you monthly and they also fee waiver to join their partnered airline’s frequent flyer program.
Another one of our lenders is offering 10,000 flyer points for every $100,000 if you’re borrowing over $150,000. This is an introductory offer.
On top that you will receive 1,000 reward points per month as long as your mortgage is at least $150,000 and 25,000 points on year 3 and 5 of your mortgage.
Do you qualify for a home loan with reward points?
One of our mortgage brokers can properly assess your eligibility and let you know. Please call us on 1300 889 743 or complete our free assessment form today.
How does it work?
Let’s say that you borrow $500,000 and you maintain a loan balance of $150,000 for 5 years.
You could earn the following reward points with one of our lenders:
- 50,000 reward points at settlement.
- 12,000 after year 1.
- 12,000 after year 2.
- 37,000 after year 3 (includes 25,000 point bonus).
- 12,000 after year 4.
- 37,000 after year 5 (includes 25,000 point bonus).
That works out to be 160,000 frequent flyer points at the end of five years.
How far can I travel with the points?
Depending on the airline’s frequent flyer program, 160,000 reward points is enough for a return flight for two from Sydney or Melbourne to Singapore flying business class.
You’ll still have to pay around $290 in taxes and fees but you’re still saving $4,010 off the cost of your flights.
As a general rule, 100,000 points is equivalent to $1,000.
Is it worth it?
The savings from a home loan with reward points and cash backs can often easily be outweighed by negotiating a better interest rate with your bank.
You could actually save thousands more off your mortgage than the money you’d save on airplane tickets or a cash back.
For example, a return trip to London from Sydney flying economy could cost you around 240,000 reward points or $1,478.
For a $550,000 home loan that offers monthly reward points and bonus points, it could take you around 13 years to accrue the points you need.
Because of this, the main benefit of a home loan with reward points is that it allows you to “top up” or upgrade your flights.
Business owners can get the most benefit
If your travel frequently for business purposes, you can generate a lot of frequent flyer points with your bank credit card.
On top of that, you can actually use the credit card to pay your business tax bills!
What are the drawbacks?
Firstly, you still have to pay tax like GST and other fees for the flights.
Secondly, you can only earn the points under the condition there is at least $150,000 to $250,000 left on your loan balance (depending on the lender).
That means you’re restricted in the amount of extra repayments you can make.
How much can I save with a sharper interest rate?
In comparison, let’s say that the $550,000 home loan you want is for a 30-year term and the advertised interest rate is 4.50%.
If your mortgage broker could negotiate a 3.70% rate on your behalf, you could potentially save up to $255 a month.
That doesn’t sound like much but, in the first year, that amounts to around $3,060. Over 3 years, you’re saving over $9,000!
Try out the loan repayment calculator to get an idea of how much you could save over the life of your loan by getting a lower interest rate.
Why are banks doing this?
Over 2015 and 2016, the Australian Prudential Regulatory Authority (APRA) began cracking down on investment lending because they felt that banks were too heavily-weighted.
Across the board, they’ve required banks to slow their investor lending to around 10% per year.
Much of this concern stemmed from the rise in foreign investment coupled with the fear of a potential property market crash.
Banks have to “balance their books” somehow.
In order to attract more owner-occupied borrowers, some of them began offering frequent flyer point and cash back incentives as part of their home loan packages.
Why investors are flocking to loans with points
However, many investors are still attracted to frequent flyer point deals because the interest on the mortgage is tax deductible.
In addition to this, investors tend to have a higher net worth and are more likely to use points to upgrade their flights.
What airlines are partnering with banks?
At the moment, we know that Qantas and Virgin’s Velocity program have partnered with a couple of major lenders to offer these home loan deals.
However, depending on the airline, you may be able to swap points with other frequent flyer programs including:
- Singapore Krisflyer.
- Emirates Skywards.
- Malaysian Enrich.
- Cathay Asia Miles.
Golden tips on frequent flyer points
According to iFLYflat chief executive Steve Hui, or the so-called “Points Whisperer”, home loans with reward points are becoming more and more common.
He said that the trick to getting the most benefit out of frequent flyer points is by choosing the right credit card with the lender.
By making the right choice, you could double the amount of points you can earn.
Hui said it also comes down to how often you use the credit card.
He suggests switching the money that you’re already spending on living costs and bills from EFT and cash to your card.
This can maximise the points you can earn.*
*This is general information only and shouldn’t be taken as financial advice. You should take your own financial situation into account before making any decision related to borrowing and credit. It’s recommended that you seek independent advice from a financial expert.
Apply for a home loan with reward points
Discover if you’re eligible for a home loan with reward points so you can start saving on flights.
Call us on 1300 889 743 or complete our free assessment form to speak with one of our mortgage brokers.