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The rate pack: save more by bundling your home loan

March 9, 2010

Australians are smarting up to the benefits of bundling up your home loan package for cheaper rates and fees - similar to packages that help you save on your phone or internet bills. For borrowers who are happy to use the same provider for their credit card and transaction accounts, choosing these package deals over singular home loans could save hundreds of dollars per month.

The best things come in threes
Package home loans work by combining a transaction account and credit card with a standard variable home loan at a discounted rate. Due to the hefty fees and repayments typical of a large home loan, the discounted rate is often competitive enough to sway borrowers.

Canstar Cannex recently compiled a report comparing 50 package home loans from 27 lenders. Canstar Cannex financial analyst Mitchell Watson says package home loan borrowers are getting the features of a standard variable home loan at the price of basic variable mortgages.

"The home loan discount can be as high as 0.75 percent, which is better than a honeymoon, or introductory, rate because it's for the life of the loan, not just a specified period," Watson says.

The cons
Bundling the package comes with a price - this is usually an annual fee between $200 to $500.

If you're considering a packaged home loan, you should make sure the other products in the package suit you as well. Do this by comparing the rates on your bundled credit card and transaction account against your current ones to see how likely you will use them.

The savings
According to Canstar Cannex calculations, package home loan borrowers can save over $2000 in their first year in interest on a $300,000 loan, which effortlessly outweighs the annual charges. For larger loans, the savings are even bigger. Borrowers on a $500,000 loan stand to save $3500 in the first year, compared to an unpackaged mortgage.

Some financial institutions will throw in other bonuses as well, such as discounts of up to 10 percent on your car insurance.

At the end of the day, the regular savings you make for packaging your mortgage speak for themselves. You're expected to save $135 a month on a $300,000 loan, which is significant enough to make you think twice about applying for home loans on their own.

Compare home loans online for the lowest interest rates, fees, and professionally recognised products. After all, the best bundle of savings is the one you reward yourself with.

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