Loan Features
Additional Repayments
Deferred Establishment Fees
Interest in Advance
Interest Only
Internet Banking
100% Offset Accounts
Ongoing Fees
Portability
Rate Lock
Redraw
Salary Crediting
Sub-Accounts
Switching
Telephone Banking
Weekly/Fortnightly/Monthly Repayments
Additional repayments allow you to pay over and above the minimum required by the lender. By paying extra this amount comes directly off the principal owing on the mortgage thereby reducing the interest paid overall and reducing the loan term. Variable rate loans generally do not charge the borrower when making additional repayments. Lenders traditionally charge break costs on fixed rate loans if additional repayments are greater than a specified amount. Limited additional repayments are generally possible during the fixed period for no fee.
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The initial establishment fee charged to the customer only covers part of the costs incurred by the lender in setting up and providing a loan. Generally a lender will seek to recover the extra costs if the loan is repaid in full within the first 3-4 years. Deferred establishment fees are generally charged on introductory interest rate, discounted interest rate loans, low document loans and non-conforming loans.
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In some cases, lenders will offer a discounted interest rate e.g. (0.10%-0.20% below standard rates) by paying the interest in advance. The interest can usually be paid monthly, quarterly, half-yearly or yearly. Investors looking to maximise tax deductions commonly use this feature.
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Interest only loans require only the interest to be paid each month. Therefore no repayments are actually going toward reducing the mortgage. Most lenders offer interest only terms up to 5 years but products such as a Line of Credit can offer interest only terms of 30 years plus. This feature is popular with property investors looking to maximise their cashflow and tax benefits currently offered by the tax office and hence is a popular option for investment loans.
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Some of the most common features of internet banking are: allowing a customer to check account details, ability to print the last three months of transaction history, check account balances, find out the amount available for redraw, request a redraw, transfer funds to a previously nominated account, check next loan repayment date and amount, pay bills using BPay, change password, contact customer service by email and check the current interest rate applicable to your loan.
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A 100% offset account allows you to link a savings account to your home loan. Whatever savings you have in your account is deducted from your home loan account balance before the loan interest is calculated. For example, if $100,000 is currently owed on your home loan and there is $5000 in your 100% offset savings account, the monthly interest would be based on $95,000. The offset account earns no interest itself and therefore no tax is paid on the interest in the offset account.
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Many lenders charge ongoing administrative fees for most major loan types. Ongoing fees are usually charged monthly, however line of credit loans and professional packages usually charge these fees on an annual basis. With professional packages the ongoing yearly fee usually includes a free transaction account and a fee free credit card. There are lenders that charge no ongoing fees and these should be considered carefully.
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This is the ability to transfer your mortgage to a new property without paying out the loan in full. This could save on new loan costs, stamp duty and refinance fees.
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A rate lock option provides the customer with the opportunity to lock in a fixed interest rate, and therefore guarantee that rate at settlement. The interest rate is locked at different times depending on the lender e.g. at application, at conditional approval or full unconditional approval. Most lenders charge a fee to lock the rate from a few hundred dollars up to $600 + 0.15% of the loan amount.
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When a borrower pays extra or additional repayments on their home loan they may have the ability to withdraw these extra funds in the future. Having the ability to withdraw additional repayments it known as redraw. There are limitations to redraw facilities such as the minimum that can be withdrawn at one time, the cost to redraw and the frequency of withdrawing. Some lenders also only allow redraw at their discretion; this means that some lenders have the power to deny a redraw request.
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Salary crediting allows borrowers to have all or part of their salary directly deposited into their loan account by their employer. As soon as this money hits the account the loan balance will decrease thus lowering a borrower's interest payment.
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A borrower may split their mortgage into multiple accounts, commonly known as sub-accounts. The sub-accounts can be different interest rate structures e.g. variable or fixed and may be used for different loan purposes, for example personal debt separated from investment debt. Statements will be issued for each sub-account so that it is easy to see any split of funds.
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Switching refers to changing the loan product before the end of the loan term. The lender is staying the same however the product is changing e.g. changing from a variable rate loan to a fixed rate loan. At the end of a fixed rate term you will generally have the option to either take up another fixed term or switch into a variable rate product. Check with the lender to see whether there would be any fees associated with a switch.
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Some of the most common features of phone banking are: allowing a customer to check account details, check account balances, find out the amount available for redraw, hear the most recent transactions on the account, transfer funds to a previously nominated account, check next loan repayment date and amount, pay bills using BPay and hear the current interest rate applicable to your loan.
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Most lenders offer flexible repayment arrangements. Generally it is easier to line up your mortgage repayments with how often you are paid, this helps smooth out your cashflow. By paying weekly or fortnightly the mortgage is repaid faster as you actually make one extra repayment per annum on your mortgage.
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