Many Loan Options
When you are looking for a home loan there are so many options out there in the market that it can get rather confusing. One of those options is a Home Loan Package. It’s usually a bank that offers these types of packages and it offers a way to utilise a few of the bank’s services at a discounted rate. What the bank provides is a home loan and they add a few financial products. Perhaps a credit card and/or a transaction account with no fees.
These packages are quite attractive to buyers. Banks ensure the popularity of their packages by offering at least three products, usually the minimum needed to be eligible, to add to the home loan.
It’s a competitive market, particularly for banks considering they dominate the home loan market, so they can dangle the proverbial carrot on that home loan interest rate discount. Because they have you on board, don’t be surprised to see further discounts added to your credit card interest rate, lower account fees and while you’re there, you might as well take their heavily discounted home and contents insurance. It’s all about savings.
The level of discount that will be offered varies between financial institutions, so it is essential to understand the pros and cons and weigh this against your circumstances.
All in One Place
If you have had a few different accounts and cards with numerous institutions you will find it a lot more convenient and manageable to have all your banking with the one lender. Given the lender has probably offered you savings on accounts, cards and your mortgage, it wouldn’t make much sense to have accounts and cards at a higher rate or transactional costs with other institutions.
More Discounted Products
As mentioned, the four major banks own a big chunk of the existing market in mortgages and that gives them the ability to offer these package deals against which smaller lenders have difficulty competing. If you are looking to take out a home loan with a building society or a credit union, they usually offer products in which they specialise.
For high income earners, package deals will help build equity a lot quicker in an offset account. The savings on interest can be worked through a combination of having the salary reduce the interest charge and living off the credit card. Just remember to pay off the card each month!
It’s not always smooth sailing when you are paying off a mortgage. Interest rate rises, changes in lending policy, and on a personal level, problems that make repayments difficult. Also, someone offers a better deal. Wriggling out of a home loan package may incur costs. In fact, those costs can make it unattractive to move to another lender.
Don’t kid yourself that discounts on financial products will save you anywhere near the savings you will make on a lower mortgage rate. Repayments over 30 years add up to an astronomical amount of interest. Saving a couple of dollars per transaction or having a lower credit card rate won’t come anywhere near that amount. While discounted mortgage rates might sound attractive, talk to a mortgage broker or use an online mortgage calculator to compare basic mortgage rates.
Keep it Simple
You may be better off by taking out a simple home loan and not be attracted by the bells and whistles of special packages. Technology these days means accessing your loan account online and utilising a redraw facility (f applicable) to pay off the mortgage faster, which saves some serious interest, or if you’re in need of extra funds, withdraw from that account.
Does it Cost?
Check that the package deal does not have something like an annual charge. If it does carry an annual fee, work out whether the savings overall on lower interest rates for the life of the loan make you better off.
Here to Help
If you don’t have the time to do a lot of research, then using expert mortgage broker services, knowledge and experience is great way to get the information you need and the best home loan tailored to your budget and circumstances. Mortgage Broker services are free, and personalised service is an added bonus!