Loan features designed to make your life easier

Did you know that home loan lenders provide you with extra features to help you manage your mortgage. You might of heard about extra repayments, offset and a line of credit but what do they mean.

Extra repayments

This feature allows you to make additional repayments on top of your minimum monthly repayments. With the option to make unlimited additional home loan repayments, you can pay off your mortgage faster and reduce the amount you’ll pay in interest. The great news is that most lenders offer this feature on variable rate home loans.

Redraw facility

A redraw facility is an extension of the extra repayments feature and allows you to withdraw the extra repayments that you’ve made on the loan if you need them. It must be noted that not all redraw facilities are the same, you will need to consider things such as:

Number of free redraws per month: The number of times you can withdraw additional loan repayments per month without any charge.

Fee per redraw: Some lenders may charge you every time you withdraw once you’ve used up your free transactions.

Minimum redraw amount: The minimum redraw amount is the smallest amount you can withdraw.

Offset account

An offset account is almost the same as a normal savings account. The difference between the two is that instead of earning interest from the money you have in savings, you save interest on your home loan depends on how much money you have in your offset. For example, if you had an $800,000 home loan and you had $30,000 your offset account then you would only pay interest on $770,000. If you’re on a good salary and managing your spending money, you can also use an offset account with a credit card to effectively manage your expenses – a common strategy is to have your salary paid into the offset account and use the credit card to fund your monthly expenses. You should then aim to make the monthly credit card repayment within the interest free period to maximise your savings!

Line of credit

A line of credit (LOC) facility is similar to a credit card – although with a lower interest rate and a higher borrowing limit, therefore it requires a great deal of financial control. The lender allows you to use funds for any purpose you need. With a line of credit you can use all of it at once or as little as you want – the great news is you only pay interest on the amount used. If you’re self-employed and your income fluctuates regularly, a line of credit can be a great option for you!

Using these extra features largely depends on your financial situation and what you’re trying to achieve. The real question comes down to whether you’ll actually benefit from the extra features – for this part have a chat with your trusted Mortgage Broker.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.