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If you’re still in the early part of your home buying journey, you’re probably still researching different home loans. We get it – there’s a lot of choice out there and sometimes it can be overwhelming. Fixed or variable? 20 year, 25 year or 30 year? But don’t worry. We’ll take you through the most common features of a home loan that may work for you.
Extra repayments
This is a big one. When borrowers come into some extra money, or decide to pay their home loan faster, they might make extra repayments. Unfortunately, especially with fixed rate home loans, lenders often do not allow extra repayments. Rather, this is more common with variable rate loans.
So, if your budget will always invite the potential for extra cash to be laying around, you might be considering making extra repayments on your loan. At BFG, we can match your requirements to your ideal lender so you don’t miss out on becoming debt free faster.
We’re always only a phone call or email away. Don’t hesitate to contact us with any queries regarding making extra repayments, or any other queries you may have on features of a home loan – that’s what we’re here for.
Loan splitting
Loan splitting allows you to split up your repayments into multiple loan accounts. Why would this be beneficial? Well, you may want some of your loan in a variable rate account, so you’re able to make extra repayments but you don’t take on the full risk of your interest rate rising.
Another benefit of splitting up your home loan is the ability to keep track of loans used for other purposes, like buying shares and using your property as security. Opening a separate account for this allows you to show the ATO which part of your home loan is tax deductible.
Repayment holiday
Think of having a repayment holiday option within your home loan as a type of insurance policy. Lenders know life happens and your financial situation can change in a hurry. If you need to reduce or pause repayments, a repayment holiday help.
The length of repayment holidays varies by lender and home loan product, but is typically offered for 6-12 months.
Home loan redraw
Home loan redraw is linked to making extra repayments. Think of it like another savings account – you cover your repayments and then add some extra repayments when you can. So now it’s there for a rainy day or a big ticket item you might be saving for – like a trip or a new car.
Similar to making extra repayments, a home loan redraw is not available on all loans, and may attract extra fees. It’s more commonly available as a feature of variable rate home loans and not typically offered in fixed rate home loans.
Interest-only home loan repayments
Interest-only repayments are advantageous to investors looking to maximise their tax deductions but can be useful for owner-occupiers as well. They only service the interest on a home loan, not the principal (amount borrowed, excluding interest charged by the lender).
This means you are not servicing the actual amount you borrowed but it does allow you to reduce your payments for a set period of time. You may be interested in this option if there is something else coming up that will affect your income. Perhaps you’re studying and need to pay for tuition or you’re starting out in your career and your salary will rise.
Individual circumstances vary, but remember that interest-only repayments increases the total amount of interest you pay on your home loan.
Disclaimer: The information provided above is general in nature and does not constitute financial advice. Please speak to us for recommendations on your individual circumstances and requirements.
