Home loan features
Some lenders offer to tailor their loans to your needs. Your lender may charge you extra for some of these features, so think carefully about what you need and how it will benefit you.
Offset facility
A mortgage offset facility can save interest on your loan. It links your mortgage to a savings account where you can deposit money.
How it works
Lenders usually work out your interest based on how much of your loan you still need to repay.
With an offset facility, they will:
- look at the total amount of your loan you still need to repay
- subtract (‘offset’) the figure in your offset account from this total
- calculate your interest based on the result of this equation.
The more money you put into the offset account, the more you save on interest.
Fees and charges
If you use an offset facility, your lender may:
- charge a higher interest rate
- impose fees and charges to use it.
Redraw facility
A redraw facility allows you to withdraw any extra repayments you have made. Competitively priced loans with redraw facilities are becoming more common.
Fees and limits
You may still end up paying more. Redraw facilities:
- often charge a fee for each withdrawal
- may set a minimum amount for each redraw
- may limit the number of redraws per year.
Think about how often you are likely to use a redraw facility before deciding whether you need this feature.
Mortgage protection insurance
If you have a heavy mortgage, your lender may insist that you take out mortgage protection insurance. You may be paying for this insurance, but it does not act to protect you. It protects the lender.
Missed repayments
If you miss a repayment (or if you default), the insurer:
- makes the repayment for you
- will pursue you for the repayment.