When it comes to home loans, there’s a lot more to consider than just the interest rate. One powerful tool many Australians might not fully explore is a mortgage advantage package. These bundles can be a powerful tool for enhancing the financial benefits of your home loan.
So, what exactly is a mortgage advantage package? In a nutshell, it’s an add-on offered by lenders that combines your home loan with a suite of benefits, like discounted rates, waived fees, and other financial perks. Think of it as a value pack for your loan that could have a positive impact over time.
This is especially relevant now, as many Australians are feeling the pinch of high interest rates. According to recent data from the Reserve Bank of Australia (RBA), the cash rate has seen consistent hikes in 2023-2024, pushing mortgage interest rates to levels many haven’t experienced in over a decade. For homeowners, that means monthly repayments have gone up, leaving little wiggle room in household budgets.
Given this environment, finding ways to ease the financial strain is crucial. Mortgage advantage packages are one way to do just that. They don’t just provide potential cost benefits—they can also help manage your finances by consolidating benefits into a single agreement.
Tip: Always check if the savings from the package outweigh the annual fee that most lenders charge. For some, the benefits far exceed the cost, but if you’re not taking full advantage of the features, it might not be worth it.
Next up, let’s break down exactly what features you should look for in these packages.
Interest Rate Discounts
One of the biggest drawcards of mortgage advantage packages is the interest rate discount. These discounts are designed to reward borrowers for committing to a package product which can make a difference in your overall loan costs. Even a small reduction in your interest rate can translate into interest rate savings over the life of your loan—money that could be better spent on your family, investments, or even just enjoying life!
For instance, many lenders offer discounts of up to 1.30% off their standard variable rates as part of a mortgage advantage package. Let’s put that into perspective: on a $500,000 loan with a standard variable rate of 6.00% p.a., a 1.30% discount would reduce your interest rate to 4.70%. That might not sound like much at first, but it could save you over $6,500 a year in interest alone. Over the life of a 25- or 30-year loan, this adds up!
But that’s not all. Mortgage advantage packages can provide flexibility between fixed and variable rates, allowing you to tailor your loan to suit your financial goals. For example, if you’re keen on locking in certainty with a fixed-rate loan, you might still enjoy some perks like fee waivers or access to discounted variable rates for a portion of your loan.
This flexibility is especially valuable in today’s market. Fixed rates might seem appealing for managing repayments & the home budget, but with the RBA signaling potential shifts in the cash rate in 2025, many borrowers are opting for a split loan. This allows you to fix part of your loan to hedge against future rate rises while keeping the other part variable to benefit if rates drop.
Tip: If you’re considering a mortgage advantage package, ask your lender about how the interest rate discounts compare across fixed, variable, and split loan options. This ensures you’re making the most of the package’s flexibility while keeping your savings on track.
Now that we’ve unpacked interest rate discounts, let’s dive into another key feature of these packages: fee waivers and reductions.
Fee Waivers and Reductions
Another feature of mortgage advantage packages is often fee waivers and reductions offered. These can make a difference to the upfront and ongoing costs associated with your home loan, providing even more benefits over time.
For starters, many packages waive fees such as application fees, which can range from $500 to $1,000.and potentially ongoing costs such as monthly account-keeping fees, typically $10 to $20 a month. Over the life of your loan, these small but consistent savings can really add up—think $2,400 in waived account fees alone on a 20-year loan.
Let’s break it down further. Without a mortgage advantage package, borrowers might pay around $1,500 in lending establishment costs for application and settlement fees. Add to that $240 per year in account fees, and you’re looking at over $6,000 in fees over 20 years—just for maintaining the loan! By opting for a package, you could potentially avoid all of these costs, freeing up funds for home improvements, emergencies, or simply paying off your loan earlier.
However, it’s essential to go beyond the headline savings and consider the total cost of the loan. For example, switching lenders down the line might incur discharge fees—costs that can catch you by surprise if you’re not careful. While discharge fees are regulated in Australia, they still vary and can be as high as $350 to $500. Some lenders with mortgage advantage packages even waive these fees, so it’s worth asking upfront.
Tip: Always calculate the total cost of your loan, including any potential fees for switching lenders, early repayment penalties, or package renewal charges. A mortgage advantage package might waive several fees, but understanding the fine print ensures you’re fully aware of all potential costs.
With fee waivers taken care of, let’s move on to another important feature that can make or break your financial planning: offset accounts and redraw facilities. These tools can potentially supercharge reducing the interest paid over the loan term and give you more control over your money.
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Offset Accounts and Redraw Facilities
Offset accounts and redraw facilities are two features of mortgage advantage packages that can help you take charge of your finances while also reducing the amount of interest you pay. These tools are especially valuable for borrowers looking to balance financial flexibility with long-term savings.
Let’s start with offset accounts. An offset account is a transaction account linked to your home loan. Any money you keep in the offset account reduces the balance of the principal amount on which interest is calculated. For example, if you have a $400,000 home loan and $20,000 in your offset account, you’ll only pay interest on $380,000. Over time, this simple feature can reduce the amount of interest paid and may help reduce the loan term.
Some mortgage advantage packages even allow you to link multiple offset accounts to your loan. This can be a game-changer for families or individuals who want to manage different savings goals—like one account for emergency funds, another for travel savings, and a third for everyday expenses—while still reducing their interest. It’s flexibility and savings rolled into one.
On the other hand, redraw facilities offer another layer of financial control. These allow you to access any extra repayments you’ve made on your loan. For instance, if you’ve been making additional payments to pay your loan off more quickly and an emergency arises, you can dip into these funds without needing to take out a separate loan or rack up credit card debt. It’s your money, working for you when you need it most.
The key difference between the two is that offset account is a separate transaction account while redraw is a feature of the loan account itself. Many packages include both, so you can enjoy the best of both worlds—savings when you don’t need the money and flexibility when you do.
Tip: Check for any restrictions or fees tied to these features. Some lenders limit the number of redraws or impose minimum amounts, while others charge for additional offset accounts. Choosing a package with no strings attached ensures you can maximise these tools to their fullest.
Next up, let’s explore another underrated benefit of mortgage advantage packages: insurance discounts and other added perks that could boost your financial security.
Bundled Products and Additional Services
One of the lesser-known perks of some mortgage advantage packages is the opportunity to bundle other financial products, creating a one-stop-shop for your banking needs. Beyond convenience, bundling products like credit cards, insurance, and more can be a benefit.
For example, many lenders offer premium rewards credit cards as part of their mortgage advantage packages, often waiving the annual fees that can range from $150 to $400. These cards typically come with perks like cashback, gift cards, or travel points, helping you get more value out of your everyday spending. Imagine earning points for groceries, utilities, or even your home loan repayments—those rewards can add up quickly!
Another feature available on some packages is discounts on insurance premiums. Whether it’s home, contents, or even life insurance, bundling your coverage with the same provider that manages your mortgage can be a big benefit. For instance, some packages offer up to 15% off home and contents insurance, which could amount to hundreds of dollars annually while ensuring your biggest assets are protected.
In some cases, lenders may even throw in extra perks like waived account fees for other bank accounts, priority customer service, or discounted rates on personal loans. These benefits can help you with managing your finances while reducing costs across the board.
Tip: While bundling products can be appealing, always assess the individual terms and features of each product. A rewards credit card is only worth it if the benefits align with your spending habits, and an insurance policy bundled with your mortgage should still provide comprehensive coverage at competitive rates.
Finally, let’s wrap things up by discussing how to evaluate mortgage advantage packages overall and ensure they truly align with your financial goals.
Flexibility and Loan Customisation
An advantage of mortgage advantage packages is the flexibility they offer, allowing borrowers to tailor their loans to suit their changing financial situations and goals. This adaptability is especially important in a dynamic economic environment, where interest rates and personal circumstances can shift unexpectedly.
One key feature is the ability to switch between interest-only and principal & interest repayments. For example, if you’re an investor looking to maximise cash flow, interest-only repayments might be a favourable option initially. On the other hand, owner-occupiers often benefit more from principal & interest repayments, as they help reduce the loan balance over time. Many mortgage advantage packages allow transition between these repayment types, offering borrowers greater control over their financial strategy.
Another valuable option is the split loan feature, which lets you divide your loan into portions—one with a fixed rate and the other with a variable rate. This can be an effective way to hedge against interest rate fluctuations. For instance, you can secure the predictability of a fixed rate for part of your loan while taking advantage of any potential rate drops on the variable portion. Split loans provide a balance of stability and flexibility, making them a popular choice for borrowers navigating uncertain rate environments.
These features are particularly useful in Australia’s current lending landscape, where interest rates have seen frequent adjustments. Mortgage advantage packages allow borrowers to adapt their repayment structures without the hassle and costs of refinancing, ensuring they’re in a position to manage their loan effectively.
With all the flexibility and customisation options in mind, let’s pull everything together and talk about how to evaluate these packages holistically to ensure you’re choosing one within your best interest.
How to Choose a Package To Suit Your Needs
With so many mortgage advantage packages on the market, finding the right one can feel overwhelming. The key is to focus on the features that align with your financial goals and lifestyle. To help, here’s a checklist of things to consider when evaluating your options:
- Size of the Loan
Many mortgage advantage packages come with minimum borrowing thresholds, often starting around $150,000 to $250,000. If your loan doesn’t meet these criteria, the package may not be available to you. Make sure the package suits the size of your loan to ensure you can maximise the benefits. - Interest Rate Discounts
Look for packages offering significant discounts on the standard variable or fixed rates. For example, a 1.30% discount on a $500,000 loan can reduce your interest by over $6,500 annually. Always compare the discounted rate to standard rates and ensure the package includes competitive terms. - Offset Account Options and Fee Structures
Check whether the package includes offset accounts and how many you can open. Multiple offset accounts can provide flexibility for different savings goals. Don’t forget to confirm if there are any fees tied to these accounts, as they can eat into your savingsbenefits over time. - Bundled Services
Consider what additional products are included in the package, such as credit cards with waived fees or discounts on insurance premiums. These bundled services can add significant value, especially if they align with your current financial needs. - Flexibility of Repayment Options
Evaluate whether the package offers flexibility, such as the ability to switch between interest-only and principal & interest repayments or split your loan between fixed and variable rates. These options can help you adapt your loan to suit both current circumstances and future goals.
Conclusion
Why Mortgage Advantage Packages Are a Smart Choice
Mortgage advantage packages are more than just a collection of features—They’re a powerful financial tool that can help Australian borrowers optimise their finances, maintain control, and adapt to changing circumstances.. Here are the key reasons why they’re worth considering:
- Interest Rate Discounts
With discounts often reaching up to 1.30% on standard variable rates, these packages can offer significant reductions on interest costs. Lower interest rates result in smaller repayments and greater financial flexibility. - Fee Waivers and Reductions
By eliminating application, settlement, and ongoing account-keeping fees, mortgage advantage packages cut out many of the hidden costs of home loans. This can lead to a reduction in costs over the life of the loan. - Offset Accounts and Redraw Facilities
These features give borrowers the ability to reduce interest payments and access surplus funds in emergencies, offering both savings and flexibility. Packages that offer multiple offset accounts add an extra layer of convenience for managing different financial goals. - Bundled Products and Additional Perks
Packages often include value-added services like premium rewards credit cards with waived annual fees and discounts on insurance premiums. These benefits can amplify your savings while streamlining your financial management. - Flexibility and Customisation
Borrowers can tailor their loan to their needs with features like split loans and the ability to switch between interest-only and principal & interest repayments. These options ensure that the loan adapts to personal circumstances and market changes.
The Bottom Line
In a competitive and often unpredictable lending environment, mortgage advantage packages offer a comprehensive way to reduce loan costs and stay financially agile. Whether you’re a first-time buyer, an investor, or a family upgrading to your dream home, these packages provide the tools to make your home loan work harder for you.
By carefully comparing packages and selecting one that aligns with your goals, you can optimise your mortgage experience and feel more confident in your financial decisions.
Why Consulting a Mortgage Broker Matters
While mortgage advantage packages offer plenty of benefits, choosing the right one can be tricky. With so many options on the market, it’s easy to feel overwhelmed by the fine print and complex terms. That’s where consulting with a mortgage broker can make a difference.
Mortgage brokers specialise in home loans, and they take the time to understand your unique financial situation and long-term goals. By evaluating your borrowing capacity, lifestyle, and savings priorities, they can help you pinpoint the package that offers the most value. Whether it’s maximising interest rate discounts, ensuring flexibility in repayment options, or taking full advantage of bundled perks like offset accounts and insurance discounts, a broker will ensure no stone is left unturned.
Another key advantage of working with a broker is their access to a wide range of lenders. They can compare offers across the market, including products that might not be advertised publicly, ensuring you get a package to suit your needs. Additionally, brokers can help you navigate any hidden costs or conditions, such as annual package fees or discharge penalties, so there are no surprises later on. The Bottom Line: A mortgage advantage package is only as good as how well it aligns with your circumstances. Consulting with a knowledgeable broker ensures that the package you choose supports your financial goals now and into the future. With the right guidance, you can move forward with confidence, knowing your home loan is working as hard as you are.
Frequently Asked Questions
The benefit of interest rate discounts in mortgage advantage packages is one of their most compelling benefits. Even a small reduction in your interest rate can potentially translate into savings benefits over time. Let’s break it down with an example.
Imagine you have a $500,000 home loan with a standard variable rate of 6.00% p.a.. Without a discount, your annual interest cost would be $30,000. Now, let’s apply a common interest rate discount offered in many packages—say 1.30%. This lowers your effective rate to 4.70% p.a., reducing your annual interest cost to $23,500. That’s a saving of $6,500 a year, or more than $162,500 over a 25-year loan term!
These savings don’t just reduce your financial burden—they can also help reduce your loan term. By redirecting even a portion of your savings toward extra repayments, you’ll cut down the principal more quickly and reduce your interest costs.
If you opt for a split loan, which combines fixed and variable rates, the benefits may vary depending on the proportion of your loan under each rate and market fluctuations. For example, locking in a fixed rate for half your loan while enjoying a discounted variable rate on the other half can potentially give you both predictability and an opportunity to reduce the amount of interest over the life of your loan.
Tip: To get a clearer picture of the savings benefits, use an online mortgage calculator or ask your lender or broker to run the numbers for you. This ensures you understand exactly how the interest rate discount will impact your repayments and long-term savings.
The bottom line? A mortgage advantage package with a strong interest rate discount can potentially be a game-changer for your finances, giving you more breathing room in your budget and helping you achieve your financial goals sooner.
When considering mortgage advantage packages, it’s crucial to be aware of potential hidden fees that could impact your overall savings. While these packages often come with enticing benefits like interest rate discounts and fee waivers, understanding the full cost structure is essential to making an informed decision. Here are some common fees to watch out for:
1. Annual Package Fees
Some mortgage advantage packages charge an annual fee for the benefits they provide. This fee can range from $200 to $500 or more, depending on the lender and the features included in the package. It’s important to factor this fee into your overall cost analysis to see if the savings from other features still outweigh the expense.
2. Discharge Fees
If you decide to switch lenders or pay off your loan early, you may incur discharge fees. These fees can vary widely and typically range from $300 to $500. Some lenders waive these fees as part of their package, so it’s worth checking whether this applies to your potential loan.
3. Settlement Fees
While many packages waive settlement fees, some may still include them. These fees cover the costs associated with transferring ownership and can add another $200 to $400 to your initial costs. Be sure to ask your lender whether settlement fees apply to your chosen package.
4. Application and Valuation Fees
Although many packages come with no application fees, some lenders might still charge for property valuations or other initial costs. These fees can amount to several hundred dollars, so clarify whether they apply to your situation.
5. Ongoing Account Fees
While mortgage advantage packages often waive monthly account-keeping fees, some may charge a fee if you don’t meet specific conditions, such as maintaining a minimum balance. Be sure to understand any conditions tied to fee waivers.
The Bottom Line
While mortgage advantage packages can provide many benefits, it’s vital to read the fine print and ask questions about potential hidden fees. A thorough understanding of all costs involved ensures you can accurately assess whether a package meets your financial needs and goals.
Tip: When comparing mortgage packages, create a comprehensive cost breakdown that includes all potential fees. This will help you make a more informed choice and avoid any unwelcome surprises down the line.
An offset account is one of the most powerful features available in many mortgage advantage packages, providing a strategic way to reduce the interest you pay on your home loan while enhancing your financial flexibility.
Here’s a closer look at the key benefits of having an offset account:
1. Reduced Interest Costs
The primary advantage of an offset account is that it helps to reduce the amount of interest charged on your home loan. When you deposit money into the offset account, it effectively “offsets” the loan balance on which interest is calculated. For instance, if you have a $400,000 loan and $30,000 in your offset account, you’ll only pay interest on $370,000. This can result in considerable cost reductions over the life of the loan, potentially reaching thousands of dollars.
2. Flexible Access to Funds
Unlike making additional repayments directly to your loan, which can be difficult to access later, funds in an offset account are readily available for withdrawal. This flexibility allows you to use your savings for emergencies, large purchases, or investments without incurring penalties or fees. It’s your money, easily accessible when you need it!
3. No Tax Implications
The interest savings from an offset account are not considered taxable income, unlike some investment earnings. This makes it a highly efficient way to save on interest costs without affecting your tax situation.
4. Multiple Accounts for Financial Goals
Many mortgage packages allow you to set up multiple offset accounts. This can be beneficial for managing different savings goals—like one account for everyday expenses, another for an upcoming vacation, and a third for emergencies. By keeping these funds separate, you can easily track your savings while maximising your interest offset.
5. Improved Loan Repayment Strategy
By utilising an offset account effectively, you can create a proactive strategy for managing your loan. For example, you might deposit your salary directly into the offset account and use a credit card for everyday expenses, paying off the card each month. This approach can keep your savings balance high, reducing interest costs while maintaining flexibility in your cash flow.
The Bottom Line
Having an offset account is a savvy financial move for homeowners looking to minimise their interest payments while enjoying the flexibility of accessing their savings. It’s an effective strategy to make your money work harder for you, potentially helping you achieve your financial goals more quickly.
Tip: To maximise the benefits of your offset account, try to keep as much money as possible in it for as long as possible. Every dollar counts, and even small amounts can add up to significant savings over time!
Yes, one of the standout features of many mortgage advantage packages is the ability to bundle other financial services, such as credit cards, insurance, and more, which can lead to additional savings and added convenience.
Here’s a closer look at how bundling works and the benefits it offers:
1. Cost Benefits
Bundling services often comes with cost advantages. For example, lenders may offer waived annual fees on credit cards when bundled with a mortgage package, which can save you anywhere from $150 to $400 annually. Similarly, bundling home or contents insurance with your mortgage can provide discounts, sometimes up to 15% off your premiums.
2. Simplified Financial Management
Having multiple financial products with the same lender streamlines your financial management. You can manage your mortgage, credit card, and insurance from one account, simplifying your budgeting and payment processes. This can help you keep better track of your finances.
3. Enhanced Customer Benefits
Many lenders reward customers who bundle services with additional perks, such as priority customer service, access to exclusive offers, or special promotional rates. This can enhance your overall banking experience and provide added value beyond just cost savings.
4. Convenience of Payments
Bundling allows you to consolidate your payments, which can help in budgeting and tracking expenses. With everything in one place, you may find it more manageable to keep up with due dates and oversee cash flow, reducing the risk of missed payments and late fees.
5. Potential for Loyalty Rewards
Some lenders offer loyalty programs or rewards points for bundled services, which can lead to further savings benefits. For instance, using a rewards credit card linked to your mortgage can help you earn points for travel, cashback, or gift cards, giving you extra value for your everyday spending.
The Bottom Line
Bundling services like credit cards and insurance with your mortgage package is a smart way to maximise savings and simplify your financial management. It not only reduces costs but also provides additional convenience and benefits that can enhance your overall banking experience.
Tip: When considering bundling options, carefully review the terms of each service and compare them with standalone products. Ensure that the bundled options align with your financial needs and that you’re truly getting the suitable loan option possible. This will help you make the most of your mortgage advantage package!
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Disclaimer:
This page provides general information only and has been prepared without taking into account your objectives, financial situation, or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax, or financial advice and you should always seek professional advice in relation to your individual circumstances.
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