If you're taking out a home loan for the first time, the wide variety of options available can be overwhelming.
Aside from the question of fixed, variable or split-rate loans, home buyers also have the option of added features such as a redraw facility, an offset account and more.
While the features available will vary between lenders, it's important to do your research before you make a decision about the right loan product for you. Here are some of the most common loan features you may come across.
A redraw facility can be useful for those unexpected costs that can pop up, giving you a financial buffer while also providing a way to save on interest throughout the term of your loan.
The idea of a redraw facility works on the basis that you can make additional repayments on your loan. By doing so, you can reduce the amount of interest owed and potentially pay off your mortgage faster. However, a redraw facility also allows you to access these extra payments when you need to.
This can be very helpful when you need to accommodate unplanned expenses into your budget, such as a holiday or a new car. It's important to be aware that some lenders may have a minimum redraw amount, and they might also charge you a specific fee each time you redraw funds.
An offset account is a separate account that is attached to your loan. With this feature, any savings you build up in the offset account can then be used to reduce the amount of interest you pay on your home loan.
This can be a great way to reduce the amount of interest you need to pay back, which could see you becoming mortgage-free sooner.
If you are uncertain which loan features you need, talking to an experienced mortgage broker can help you make a more informed choice.