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Freebies for the picking: Home loans with extras

Freebies for the picking loans with extras

Chris Walker reports on the value of freebies and discounts offered with home loans.

January 18, 2010

In an environment of rising rates it makes sense to get every ounce of value from your mortgage lender, and there are plenty of freebies available if you know where to look.

At the modest end of the scale, Citibank home loan customers enjoy a fee waiver on the bank’s everyday transaction account, a saving worth around $60 annually. The annual fee is also waived on the bank’s gold credit card, a further saving of $119 each year.

Peter Hayward, head of mortgages at Citibank says, “Banks are increasingly looking for ways to deepen the relationship they have with customers. Simple gestures like waiving a monthly account keeping fee generate goodwill and put money back into customers’ pockets.”  

For a more substantial perk, Greater Building Society offers fuel discounts to home loan customers. For every $100,000 in borrowings, customers receive a six-month supply of fuel vouchers (one per week). Each voucher is worth a saving of 50 cents a litre with a weekly limit of 80 litres. On a $200,000 home loan, you could save up to $2,080 in petrol bills.

The idea of getting ‘something for nothing’ holds universal appeal. However it’s essential to check that the freebies don’t come at the cost of a higher rate and fees.

Greater Building Society’s standard variable home loan rate is currently for 6.30 percent at the time of writing. While Citibank mortgage customers can expect a 6.88 percent standard variable rate. But there are at least a dozen mortgages listed on RateCity that are below 6.00 percent on their standard variable rates, and the interest savings of a cheaper loan can significantly outweigh the giveaways of a more expensive mortgage.

As a guide, over a 25-year term, you can expect to save around $23,000 in interest by opting for a loan charging 6.00 percent compared to mortgage charging 6.50 percent. It’s a saving that makes many home loan perks pale in comparison.

Getting more for your home loan can be as easy as asking your lender if they’ll throw in a sweetener. Or, if you’re happy to bundle several financial products with one financial institution, think about a packaged loan. You can expect to pay an annual package fee, but the flipside is an annual rate discount that can be worth between 0.50 and 0.70 percent – a perk that lasts for the life of the loan.

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