Features of loans
100% offset
This feature is generally only available with Standard Variable Home Loans and Professional Pack Loans. It is certainly not a feature associated with:
- No Frills Loans
- Fixed Rate Loans
It is interesting to note that due to the competative nature of the lending industry, certain lenders do offer the 100% offset feature with no frills loans and fixed rate loans.
With 100% offset loans, you loan is "linked" to a bank account you have with that same bank, (your 100% offset bank account).
In the main, the 100% offset bank account is your everyday transcational bank account. For every dollar you have in your 100% offset bank account, the bank does not ? interest on that dollar of your home loan.
If you have ? a loan, all of your savings should be held within the 100% offset account. That is, consolidate all of your savings into the one account, the offset account.
The offset account will save you interest on your home loan, whilst an interest bearing account will earn you interest, thus raising tax implications.
Redraw
The vast majority of variable rate loans have the redraw feature, few fixed rate loans have this feature.
Redraw allows you to redraw from your home loan repayments you have made over and above the minimum.
That is, you are able to draw back the advance payments you have made to your loan. You may use these funds for any worthwhile domestic purpose, for example:
- Home improvements
- Updating the car
- A holiday
- Buying shares
Redraw allows you to accelerate the repayments on your home loan, with the comfort knowing that if something unexpected occurs you can withdraw your advance payments.
This will help you to pay your loan off quicker.
Lenders, may or may not charge you a redraw fee and may or may not have a minimum amount that can be redrawn.
