A 100% offset account is a savings account linked to a loan account. No interest is paid to the offset account but instead the balance of your offset account is deducted from your loan account before the interest on your home loan is calculated. Therefore less interest is charged to your loan. For example, a borrower with a $300,000 mortgage and $10,000 in an offset account will only be charged interest on $290,000 and not $300,000.

Pro -

Savings interest is taxable, but because your offset account balance is used instead to reduce your loan interest, no tax is payable, so you are effectively reducing your tax bill. The interest rate on your offset account is the same as that applied to your loan account. This is a great rate and is much higher than you could earn on most savings accounts. The interest rate moves with your loan account rate ensuring you get maximum benefit from every dollar in your offset account.

Con -

You may have higher monthly fees attached to the account. You may need a minimum balance in the account to benefit.

This is a loan account that acts as a combined mortgage, savings and cheque account. You have a central mortgage account into which your salary and any other cash payments are deposited. The extra cash in your account reduces the principal amount owing and thereby the amount of interest charged. You then access the funds you have left over and above the minimum monthly repayment amount to pay monthly expenses. These accounts often have a credit card linked to them, with the balance owing on the card at the end of each month being drawn down from the all-in-one account. Standard transactions such as ATM withdrawals and direct debits are also managed through the account so that many borrowers will not need another bank account. This can be an effective way of using the interest-free period on your credit card each month.

Pro -	Offers flexibility Can result in interest savings if used with discipline
Con -	Higher interest rate than some other products

Professional packages are generally only available on home loan amounts over a certain value. Usually, the greater the loan amount the more likely the lender will be to offer additional discounting on the interest rate.

Pro -	Interest rate discount May include discounts on other banking products
Con -	Borrower may not need the additional services offered Borrower may be financially better off with a basic variable loan An annual fee, which typically ranges from $300 to $500 per annum is payable.

• Additional repayments

These are payments that you make which are above the standard repayment for your loan. So for example, a $320,000 loan with a 7% interest rate over a 30 year term requires a monthly repayment of $2,130. If you want to pay the loan off quickly and reduce the interest bill, you might make monthly payments of $2,500, which would include an extra repayment of $370.

• Direct salary credit

Allows your salary to be paid directly into your home loan account. This is an advantage if you are not a disciplined saver.

• Loan portability

Allows you to take an existing loan to a different property when you move. (Can potentially save you on early termination fees and break costs associated with paying out a fixed interest rate loan early).

• Redraw facility

Allows a borrower to access extra payments that have been made to their loan. This money can then be used for a variety of purposes including a holiday, furniture or car. Some lenders have a minimum redraw amount and may also charge a fee per redraw.

• Repayment holiday

This feature offers a complete holiday from repayments or a period of reduced repayments. This can be especially useful during career changes or breaks such as maternity leave.

• Switch to fixed or variable rate

Allows the borrower to switch from a variable to a fixed rate loan or fixed to a variable rate loan. There are normally fees associated when electing to switch.

• Top-up

Allows a borrower to increase the limit on a home loan, using the equity in your property for other needs (e.g. renovations).

• Construction & renovations

A loan to finance construction or renovations. Usually will include conditions that you must draw down the funds in steps, coinciding with the completion of different stages of the building activity. Most Lenders charge a fee for these progress payments.

• Bridging facility
  

Provides assistance to complete the purchase of a new property without the need to have sold the existing property which would normally be required to access available equity.

• Rate lock

Provides a guarantee to the borrower as to what the fixed interest rate will be for a period usually up to 90 days at any one time. Rate lock can be applied to new loan applications up to the time of funding.

• Internet access

Provides access to your loan details via the internet.

• Telephone access

Provides access to your loan details via the telephone.