Understanding Home Loan Features and Benefits

Modern home loans offer numerous features beyond just the interest rate. Understanding which features suit your financial goals helps you choose a loan that saves money and provides flexibility. Some features cost extra; others are standard. This guide explains the most important loan features and helps you determine which ones matter for your situation.

Offset Accounts

An offset account is a transaction account linked to your loan. The balance offsets your loan when calculating interest—$50,000 in offset reduces interest as if your loan is $50,000 smaller. You maintain full access to funds. At 6.5% interest, $50,000 offset saves $3,250 annually. This is usually the most valuable feature for borrowers with savings or irregular income.

Redraw Facilities

Redraw allows you to access extra repayments you've made above the minimum. If your minimum is $2,500 monthly but you pay $3,000, the extra $500 becomes available for withdrawal. Some lenders process redraws instantly online; others take 3-5 days or charge fees. Redraw suits borrowers wanting to pay off loans faster while maintaining emergency access to funds.

Extra Repayments

The ability to pay more than minimum repayments accelerates loan payoff and saves interest. Variable loans typically allow unlimited extra repayments. Fixed loans often restrict extras to $10,000-$30,000 annually. Even $500 monthly extra on a $400,000 loan saves $100,000+ in interest and reduces loan term by 5-7 years. This feature is essential for anyone able to pay more than minimums.

Repayment Holiday

Some lenders allow "repayment holidays" where you temporarily pause principal repayments (interest-only) for 1-12 months. This helps during financial challenges (job loss, parental leave, illness) or when managing other major expenses. Not all loans offer this—check if it's important for your circumstances. Usually requires application and approval; not automatic.

Split Loans

Split your loan between fixed and variable portions (e.g., 50/50). This balances rate certainty with flexibility. Fix part to protect against rate rises; keep part variable for offset accounts and extra repayments. Splits let you hedge your position—if rates rise, half your loan is protected; if they fall, half benefits. Ideal for risk management.

Portability

Portable loans transfer to your next property without refinancing or discharge fees. If you sell and buy within 3-6 months, you keep your existing loan and rate. This saves $1,000-$3,000 in discharge and application fees. Particularly valuable if you have a great interest rate you want to keep, or if you plan to upgrade within a few years.

Loan Top-Ups

The ability to increase your loan amount later (e.g., for renovations) without full refinancing. Lenders assess your equity and serviceability, then advance additional funds at current rates. This is more convenient and cheaper than refinancing entirely. Not all loans offer top-ups; some lenders only offer via refinance. Check if you might need additional borrowing in the future.

Package Discounts

Banks often bundle home loans with other products (credit cards, transaction accounts) for annual fees ($300-$400), offering interest rate discounts (0.1-0.3%) and fee waivers. Calculate whether the rate discount exceeds the package fee. For loans above $300,000, packages usually save money. For smaller loans, the package fee might exceed rate discount benefits.

Choosing the Right Features

Prioritize features based on your situation: Offset account if you have savings or irregular income. Extra repayments if paying off faster is a priority. Redraw if you want locked-away savings accessible in emergencies. Fixed portions if budget certainty matters. Portability if you plan to upgrade within 5 years. Don't pay for features you won't use—a cheaper, simpler loan might be better.

Key Takeaways

Loan features significantly impact your mortgage's value beyond the interest rate. Offset accounts and extra repayment flexibility deliver the most value for most borrowers. Fixed/variable splits balance certainty and flexibility. Choose features matching your financial goals and circumstances. A mortgage broker can identify loans with the right feature combinations at competitive rates, ensuring you get both flexibility and value.