Basic Loan Products vs Loan Packages – What is Better?
Basic Home Loans
Basic or “no-frills” home loans are just that, basic and without frills. But that’s not necessarily a bad thing. With this type of product all you are getting is a home loan and no associated banking products such as credit cards and transaction accounts, but they are usually priced in the lower end of the market making them a cost-effective choice. Furthermore, you are unlikely to be charged annual or ongoing account keeping fees, another attractive cost cutting feature of a basic loan.
You may see some added features like the ability to pay extra into the loan, but you can probably expect to pay a fee to redraw those extra funds should you wish to do so. In additional you are unlikely to have the benefit of an offset account so this will prevent you from using your savings as a tool to help you be debt free sooner.
So, who is likely to benefit from a Basic “no-frills” product?
Basic loans usually suit those who simply want to secure a cheap home loan product and are willing to forgo any additional benefits or associated products to do so. First home buyers are the most likely candidates though anyone that is looking for a simplistic financial solution may find this a suitable option.
Home Loan Packages
Home Loan Packages are loan products that have two or more products bundled together. When selecting a package option, you will also benefit from additional interest rate discounts off the standard advertised rates. The mortgage holder has the benefit of selecting multiple loan products under a package, so this is the preferred solution for those looking at having different loan types such as both variable and fixed rate loans in their portfolio.
In addition, a loan package will also come with a transactional account that you can expect to be an offset. Some lenders even allow multiple offsets, giving the customer greater flexibility with their banking. There will also be the inclusion of a credit card with some banks making it a mandatory feature, whereas others simply offer it as an option. On a package you may also enjoy discounts for insurance products and other associated offerings the institution may have.
There will be either an annual or monthly fee payable when you take out a package but this is negligible when considering the interest rate discounts that are potentially gained along with fee free credit cards and transactional accounts.
So, who is likely to benefit from a Home Loan Package product?
Home loan packages are ideal for those who have a more complex banking portfolio than the customer who is likely to take out a basic product. If you wish to enjoy all the features available on a standard home loan like paying extra into the loan, free redraw and the ability to offset then a package could be the right solution.
The great news, however, is that if your circumstances change during the life of your loan and you wish to move from a basic to a package or vice versa most lenders will easily let you switch your products to suit your needs.
Your Blackburne Mortgage Broker will be able to explain these and any other products and structures in detail to help you choose what is best for you, your circumstances and your goals. Contact us any time to find out more information.