Home Loan Rate – Australia

Has mortgage jargon left your head spinning? Cut through the confusion with this easy to understand guide that explains the common features of a mortgage & how they can help you to repay your loan sooner!

Redraw

Loan redraw gives the borrower the power to withdrawal any additional repayments to which were made on top of their minimum loan repayment. Eg If the borrower has been making an additional repayment of $100 on a monthly basis, then after 12 months they will be able to redraw $1,200. Note that the borrower is not restricted by the 12 months duration before they can redraw. However, please be advice that some lenders may charge a fee for loan redraws and in the case of fixed rate loans, redraw is not available.

Extra Repayments

This feature grants the borrower the freedom to make extra repayments into their loan on top of their minimum loan repayment. Eg, the borrower has a minimum monthly loan repayment of $1,000; but instead of paying the minimum figure they pay $1,500 per month into their loan. This means that they have made an extra repayment of $500 into their loan. Please note that for fixed rate loans, extra repayments is not available.

Discounts Available for Higher Loan Amounts

This feature is a discount against the loan interest rate to which most lenders provide against their standard variable (professional package) loans. Eg, CBA offer what is called a MAV concession for their customers for loans starting from $150,000 – $349,999 at 0.50% discount per annum. The larger the loan amount is the higher the discount is.

Mortgage Offset Account (100% Offset)

An offset account is a regular cheque account that has ATM, cheque book and internet access that is linked to the borrower’s home loan when the loan is setup. Instead of earning interest on the money in their offset account, the borrower is able to save interest on their home loan. Eg, if the borrower has a loan with the balance of $100,000 and they have $10,000 in their offset account then the interest is only calculated on the loan net balance of $90,000.

Line of Credit Option

A line of credit mortgage is a type of loan that allows you to use the loan as your cheque account and allows you to draw down and repay the loan as you choose. It is similar to a credit card in that it allows you to withdraw funds at anytime up to a set limit. You are also given a choice to make repayments on either a monthly basis or with some loans you don’t have to make a payment as long as you remain below the limit. A line of credit can be used to purchase most types of properties, whether it be a family home or an investment property. As the borrower you can use the line of credit to carry out renovations, pay your bills or invest in shares.

Ability to change to Fixed Rate (Fixed Rate Loan)

This is the feature to which the borrower is allowed to change from a standard variable rate loan to a fixed rate loan. A fixed rate loan is a loan where the interest rate is guaranteed to remain the same regardless of what happens with the variable rate market. Usually, the interest on a fixed rate loan is only fixed for part of the loan term, typically 1 – 5 years.