AUSTRALIANS HAVE a long-held love affair with property.  It’s the great Australian dream.

You’re not alone in wanting to own a home.  Property demand and values have escalated fuelled by record-low interest rates and tightening supply.

So it’s likely you’ll need to borrow most of the money needed to buy a home, making it the largest financial commitment of your life.

As daunting as that sounds, it pays to keep control.  The key to financial freedom is to know the different finance options available and finding a home loan that gives something back.

We’ve all been groomed to chase the lowest interest rate, but don’t let this be at the expense of product features that suit your individual circumstances and preferred lifestyle, now and in the future.

What home loan features should I ask about?

In keeping with our ongoing encouragement that people do their homework before buying a property, here are some of the key home loan features available. 

Discuss your situation and start preparing a list of the ones you think will be of benefit.

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Common features

There are a number of key features that will determine the flexibility of a home loan product and ultimately the amount you can expect to pay over the life of the home loan.

Interest rates – fixed, variable or split

  • Variable interest rates will move up or down as the economy changes.
    • These home loans typically have maximum flexibility.
  • Fixed interest rates are locked for a period of normally 5 years at a time.
    • Helps adds certainty to the household budget by knowing exactly what your repayments will be.
  • Split interest rates provide certainty and flexibility.
    • Form a view of the future but also safeguard against adverse interest rate movements.

Redraw facility

  • Make extra repayments (without penalty) to reduce interest and redraw this money if needed at a later time.
    • Extra money sits in loan rather than a separate account.

Interest offset

  • Savings held in day-to-day account directly linked to loan account.
  • Loan amount is reduced by amount held in savings account.
  • Loan interest calculated against the reduced amount.
  • Loan balance increases when money withdrawn from savings account.
  • 100% interest offset account is best.
  • Normally only linked to variable interest rate home loan.
  • There are a few lenders that allow 100% redraw offset on a fixed rate, we do!

Extra repayments

  • Additional payments that reduce the home loan balance without penalty or fees.

Line of credit

  • Simplifies multiple loans by consolidating them into one account.
  • Approved credit limit available to be accessed in part or in full.
  • Borrowed money on-hand instead of multiple requests.
  • Attracts higher interest rate on borrowed funds.
  • Requires discipline to repay.
  • These loans have been largely outdated due to the flexible nature of 100% offset accounts.

Portable

  • Allows for an existing home loan balance to be transferred from one property to another in the event of moving.
  • Keep existing features.
  • Properties must settle on the same day which can be tricky.
  • Usually only linked to a variable interest rate home loan.

Top-ups

  • Easy process for using existing equity to top-up home loan amount.
  • Increasing an existing loan is only allowed via a variable rate loan, however separate splits are normally acceptable if you loan is fixed and you wish to take out a new loan split on a fixed or variable option

Switch to fixed interest rates

  • Flexibility to switch from a variable interest rate home loan to a fixed interest rate home loan without penalty or additional fees.
  • Normally a lender charges a fee to go from variable to fixed, however, rolling from your fixed rate period to a variable rate loan is normally free

Repayment holiday

  • Take a break from repayments if circumstances change such as job loss or maternity leave.
  • Money to cover normal repayments must be available.
  • Some lenders do not allow this to occur, if you think you may need to access this at some stage, ask your lender upfront.

Related Reading: 'Boost your home loan chances'

Ask questions

Understanding your home loan options and asking questions about them is important.

No one knows what the future holds so it pays to be prepared.  The cheapest home loan today may bring with it a big sting in the future if your circumstances happen to change.

Generally the more features attached to a home loan, the higher the cost of the product.  But these may be negligible over the lifetime of the home loan – especially if you end up needing to use them.

Talk to an experienced home loan professional that wants to hear your story and discuss the options available to meet your individual needs – now and in the future.

 Are you ready to talk?

When it comes to home loans, there’s no such thing as one size fits all.

It pays to talk to someone that wants to hear your story and run through some different borrowing examples with you. 

Why not incorporate a discussion about property as part of our free, no obligation financial review with one of our experienced and accredited professionals by organising an appointment today.

That’s right.  In a refreshing twist you’ll actually talk to a real person.

It’s just one of the many features and benefits included in a tailored home loan solution from Loan Avenue – affordable home loan solutions for everyday Australians like you.

Let us show you.  To take advantage and make an appointment call 1300 56 26 28 or leave a message here.