Home Loan Features

Interest Only
Redraw
All in One
100% Offset
Professional Packages

INTEREST ONLY
Paying interest only off your home loan is an option that you may choose. The payments are less than if you were to pay principal and interest. As the term suggests, you only pay for the interest accrued on the amount borrowed. The principal balance of your home loan does not reduce during this period.

The interest only period is usually 1-5 years of a 30 year term home loan. After this period you have three options:

1. Renegotiate and continue paying interest only for another 1-5 years (a new application may be required).
2. Start paying the nominated principal and interest (this will be substantially higher due to the fact that your loan term is now 25 years after 5 years of interest only).
3. Refinance and start again! If you refinance you can again choose the interest only option, or start applying principal and interest over a new 30 year term.

An interest only home loan is suitable if you are relying on a capital gain, or want to keep repayments as low as possible to allow for additional funds to go towards other expenses or investments. [top]

REDRAW
A redraw facility offers you the opportunity to redraw or take back any additional repayments you have made on your home loan. Be aware of 'redraw fees' and the minimum redraw amounts set by the lender.

Many people take advantage of this facility by putting their savings into their home loan saving interest and helping to pay their home loan off faster rather than earning interest (taxable) in a savings account. [top]

ALL IN ONE
This type of home loan works as an account where all income is deposited and all expenses are taken out of. If managed correctly it has the ability to reduce the principal owing on your home loan and therefore the interest charges. It also has the benefit of being a one-stop shop for all of your finances where your loan, cheque, and savings accounts are combined into one. These can be interest only (line of credit) or traditional principal and interest term home loans. It is important to check out fees such as ATM, cheque and eftpos. [top]

100% OFFSET
An offset facility is similar to the 'all in one' account; however the home loan account and transaction account are separate, not combined.

All income is deposited into the offset account and you can use the offset account for ATM, eftpos, cheque, and internet transactions or in some cases transfer money from the offset account into a transaction account when required.

You are not paid interest on the money in the offset account, but the balance in the offset account is 'offset' against that owing on your home loan. Any 'notional' interest earned at the same rate as the linked loan.

Over time this can help you pay off your home loan sooner and build up equity.

There are two types of offset accounts - 100% offset and partial offset. An offset can be termed 'partial' in two ways. The offset may only apply after your account reaches a minimum balance or be at a reduced rate.

As an example, in the principal owing on your home loan is $100,000 and you have $5,000 in your 100% offset account - the principal is reduced by the $5,000 offset to $95,000. Interest only accumulates on the $95,000. Repayments continue to be made on the entire $100,000 principal and applicable interest. While savings in the offset account are actively working to reduce the loan, and repayments are working more effectively to reduce both the principal and interest it attracts.

It is again important to check all fees and charges associated with an offset facility.

Canfinance can help you choose and understand the facility that suits your needs and will highlight the pro's and cons of the facility as well as all ascertainable fees and charges. [top]

Professional Packages:

Many lenders offer a “Professional Package”. Historically these loans were offered to Solicitors, Doctors & other professionals. More recently the targeted audience has expanded to encompass clients whose borrowings exceed a prescribed amount. These loans are generally based upon the fully featured standard variable loan & come with the added benefit of interest rate discounts. E.g. some lenders offer a discount of .7% off the standard rate. This would equate to savings of approximately $6,300 in interest for a $300,000 loan over the first 3 years.

These packages become available normally when you borrow over a certain dollar amount & the discounts are tiered depending upon your total loan. E.g. a loan of $150,000 may attract a discount of .3% & a loan of $750,000 one of .7%. These discounts may vary depending upon the lenders, the loan amount & your position. Please contact Canfinance to discuss your individual requirements & circumstances.

Because many of these loans are based upon the standard variable product, they may offer other advantages. These can include offset accounts; linked credit cards with some fees waived & reduced bank fees. Canfinance will detail these features & can discuss their suitability for your situation.

Most lenders will charge an annual fee (approximately $395) to maintain the package; however this may be negated by the rate discount on offer. [top]