The home loan market has become very competitive and many banks and credit unions and originators are now offering home loan products that are packaged with features that provide discounted interest rates and loan structuring flexibility; overall they provide good value. Some lending institutions may also refer to this type of package as a Professional Loan Package which is totally dependant upon the size of the loan rather than an applicant being an professionally qualified white collar worker.
The main advantage of home loan packages is that they offer tiered discounts based on your level of borrowing. For example; the following table shows that based on a minimum level of borrowing of $100,000 the discount offered increases in proportion to your increasing borrowing amount. These packages offer total flexibility which is very important especially if your personal circumstances change.
||Discount applied||Annual package fee
|$100k to < $500k||0.50% off standard rate||$200 to $700
|$500k to < $750k||0.65% off standard rate||$200 to $700
|> $750k||0.70% off standard rate||$200 to $700|
The above is an example of the benefits that you may be offered in a home loan package.
The annual fee varies from lender to lender however, the advantage of paying an annual fee is that most all other fees such as ATM withdrawal fees and loan account keeping fees and account loan split fees are waived. The most noticeable trade off here is the payment of an annual fee to qualify for discounted interest rates and fee waivers.
Over the term of the loan you could save thousands on interest and fees.
Home loan packages offer a full array of features such as;
Salary Crediting – which offsets your loan balance owing reducing your monthly interest
No ATM withdrawals fees – lowers you monthly banking fees providing unlimited withdrawals
Full Bpay option – you may pay your bills on-line or by phone
EFTPOS – full debit card access provided
Internet banking – Full internet banking provided
No minimum redraw amount – withdraw and access your salary or surplus funds via ATM
Include other loan products in package – include a line of credit or fixed rate loans with option of interest only or principle and interest, you may make additional repayments in the fixed rate loan up to a certain amount
Waiver of the establishment fee – this fee relates to the lender setting up the loan and undertaking a property valuation
Life time discounts – the tiered discount applied to the variable rate is usually for the life of the loan
No account keeping fees – No monthly account management fees
Cheque Book – You have the option of adding cheque book facility linked to the mortgage account
Basic Home Loan package
This home loan package is a basic product that does not include the flexibility provided by the full featured home loan packages.
Most banks offer this type of loan facility. It is ideal for first home buyers, investors and applicants looking to re-finance their current home loan. This product is a no frills facility with less flexibility than standard variable loans. However this product has a highly competitive interest rate. The rate offered by these loans is lower than that of the standard variable loans. Over the long term this type of loan could save you thousands of dollars in interest repayments.
This basic home loan still offers a variety of features such as:
- A choice of principle and interest or Interest Only repayment option
- You can also make additional loan repayments without incurring a penalty
- You may also have a re-draw facility, accessing your payments made in advance
The interest rate is variable and will be subject to change should interest rates increase or fall.
This type of loan has a low interest rate with many lenders now waiving the normal establishment fees and account keeping fees ideal for those looking for simple no frills home loan finance package. The main tradeoff here is that you are compromising flexibility for a lower rate and no fees.
Low documentation home loan package
Many lenders now provide products specifically designed for the self employed for at least one to two years depending on the lender where such applicants do not have their tax returns up to date or other financial statements that banks require with traditional products.
Banks have different lending criteria for these types of loans; banks will assess the loan based on income self-certification – meaning that the borrower states and signs the declaration as affording the repayments on the loan applied for. These packages have evolved recently whereby they are offered at standard interest rates.
They have been redesigned to give borrowers lower rates, less fees (however, an annual fee may be charged by most lenders) and more flexibility offering the following features;
- Variable interest rate
- Fixed rate loan
- Line of credit
- Option of paying for lenders mortgage insurance and receive a lower rate
- Unlimited redraw facility
- ATM access
- Paying bills on-line via Bpay
- Cheque book facility
- No monthly account keeping fees
- No establishment fees
These loans also provide the ability to borrow in a personal, trust or company name.
These days most banks and other lenders charge an exit fee or a deferred establishment or discharge fee if you refinance or sell the property within the first four years of the loan term so be sure you cover this aspect with your loans officer.
Note on Loan structuring
Home Loan structuring should always be implemented with your current financial needs in mind – it should be flexible with the ability to easily increase loan limits when required with the facility of salary crediting with mortgage offset.
However, lending structures need to be adequate from a taxation, legal and estate planning perspective. You should discuss all loan structures with your accountant, solicitor or financial planner for consideration.
Loan flexibility starts by simply arranging the total loan into split loan accounts or sub-accounts and taking full advantage of loan benefits such as discounted rates and fee free banking as per above details.
Disclaimer: The above is a generic representation only. It does not constitute financial advice or mortgage structuring advice. It is only to be used as a guide only. Please discuss your financial needs with a financial planner, accountant or your banking representative. No reliance should be placed on the above information.