There’s no right loan for everyone. But there’s a right one for you.

Here’s a guide to common loan features and benefits

Of course, not all of these features will be available on every loan. You can ask us about any that interest you.

Interest Only Repayments

You only pay the interest on the loan, not the principal, usually for the first one to five years although some lenders offer longer terms. Some lenders give borrowers the option of a further interest-only period. Because you’re not paying off the principal, your monthly repayments are lower.

All-in-one Loan

This is where your loan, savings and cheque account are combined into the one home loan. With this loan account, all of your wages and any other cash payments are deposited into it. The extra cash in your account reduces the principal amount owing and thereby the amount of interest charged. You can access the funds you have left over and above the minimum monthly repayment amount to pay your monthly expenses.

These accounts usually have a credit card linked to them, with your credit card balance at the end of each month being paid off (drawn down) from the all-in-one account.

Benefits:

• The benefit of this account is that all of your other standard transactions such as ATM withdrawals and direct debits are also managed through the account so that you don’t need another bank account.
• This can be an effective way of using the interest-free period on your credit card each month.
• This account offers flexibility and simplicity of management.

Check the interest rate applicable for this feature and any other conditions applicable.

Offset Account

If you want to pay off your home loan sooner, then using an Offset account is quick, simple and effective option to do this.

An Offset account is simply a regular savings account linked to your loan account. No interest is paid to the offset account but instead the balance of your offset account is deducted from your loan account before the interest on your home loan is calculated. Therefore less interest is charged to your loan.

Eg: If you have a $200,000 mortgage and $20,000 in your offset savings account:

• The principal on the $200,000 loan is reduced by the $20,000 in your offset account
• As a result interest only accumulates on the $180,000 balance of the loan.
• Repayments continue to be made on the entire $200,000 loan at the applicable interest.

Benefits:

• The benefit is that savings in your offset account are actively working to reduce the loan principal, and your loan repayments are working more effectively to reduce your principal loan amount and the interest it attracts. This means that over a number of years, both the principal and interest on your loan are repaid faster, and you build up equity sooner.
• The interest rate applied to your Offset account is usually the same as your home loan rate, which can be higher than a standard savings account interest rate, and moves up with the movement in interest rates, hence maximising the returns from your savings account.
• The interest amount you make on your savings is normally a taxable income, but because your offset account balance is used instead to reduce your loan interest, no tax is payable, so you are effectively reducing your tax bill.

Check what the monthly fees are for this feature, and whether a minimum balance is required.

Redraw Facility

A redraw facility is commonly used, as it allows you to make additional repayments into your loan account. The two main benefits of the redraw facility are:

1. As you make extra repayments, this reduces the amount of the principal loan amount, therefore you pay less in interest costs
2. It provides you with great flexibility, allowing you to access the extra funds you have paid when you need it.

Most loans offer this feature (except the most basic variable home loans), and this feature works best for you if you want to redraw against your extra payments infrequently. Each lender has different specifications of use, therefore you can find out the following answers to suit your redraw needs:

• Is there an activation fee to set up this feature?
• How many redraws can you make per year?
• Is there a cost for more?
• What is the minimum or maximum amount you can redraw? (normally the maximum is whatever you have paid extra)
• What fees are payable for a redraw
• Is there a minimum amount to redraw
• Are there restrictions on when funds can be redrawn

Weekly or Fortnightly Repayments

Most loans repayments are structured monthly but you could pay them fortnightly or weekly. This can save you quite a bit in the long run. That’s because interest on home loans is calculated daily, so the more often you pay off a bit of the principal, the less interest you’ll pay over the long term.

Use our calculators to see how you can save by paying more frequently.

Direct Salary Credit

Allows your salary to be paid directly into your home loan account. This is an advantage if you are not a disciplined saver. See All-in-one Account.

Repayment Holiday

You may be able to take a complete break from repayments, or make reduced repayments, for an agreed period of time. This can be useful for travel, maternity leave or a career change.

Professional Package

Home loans over a certain value are offered at a discounted rate, combined with discounted fees on other banking services. These can be attractively priced, but if you don’t use the banking services you may be better off with a basic variable loan.

Portable Loans

If you sell your current property and buy somewhere else you can take your home loan with you. This can save time and set-up fees, but you may incur other charges.

Top-up

Allows you to increase the limit on your home loan, using the equity in your property for other needs (e.g. renovations).

Income Protection

Income protection insurance cuts the risk against sudden income loss. If you are concerned about this possibility, then speak with your Time Finance Loan Consultant who may be able to assist you arrange this.

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