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Are home loan packages a good deal?
Similar to bundling your home telephone, mobile, and pay TV with one company, bundling your financial products with your home loan could save you money off your mortgage. This can be appealing if you’re a first home buyer looking to pay as little as you can on your home loan and an easier way to manage your finances.
Pros and cons of home loan packages
The main appeal of home loan packages is convenience and discounts that may mean spending less than you would if you took out the packages separately. But there are also potential disadvantages, which you should weigh up to make a well-informed decision on whether a package home loan is a good deal for you.
Pros of home loan packages
Convenience
As we’ve discussed, package home loans allow you to bring a suite of financial products under the one roof. This can make it easier to keep tabs on, and manage, each individual product - making it more convenient than if you kept them separate.
Potential savings on products
If you take out a home loan package, it’s possible that the lender will offer discounted products, which means you might be spending less than you would if you took them out separately. These savings can ultimately help you keep more cash in your pocket.
Potential reduced interest rate
Your lender may also offer you a reduced interest rate on your mortgage, with a package home loan. This discount is usually tiered on the amount you borrow, meaning when official rates rise and your lender subsequently raises their interest rates, the discount will still apply and you can maintain a lower interest rate.
Access to cost-saving features
Bundling up your mortgage with your other financial products may allow you to access cost-saving features such as an offset account, that you might not have otherwise been able to use. An offset account is a transaction account linked to your home loan, designed to save how much interest you pay over the life of your loan.
Less fees
Home loan packages often come with one annual fee, eliminating individual fees for each product in the package. This could see you paying less fees overall, in terms of how many but also the dollar value you’re on the hook for.
Cons of home loan packages
May not be the best rates available
As mentioned earlier, lenders often discount interest rates as part of their home loan package. But there’s a good chance there are more competitive interest rates up for grabs on standalone home loans and credit cards, so you might not necessarily be getting the best rate on the market.
Could end up with products you don’t use
Another potential downside of taking out a package home loan is that you may end up with products you don’t use. It’s important not to be distracted by the discounted prices and sign on the dotted line before seriously thinking about the products and if they’ll be useful to you.
May discourage refinancing
Having all your lending and banking products with the one lender may make refinancing for a better rate or more suitable product a bit of hassle. As a result, you might be less likely to seek out and switch to a better deal.
High annual fee
As mentioned earlier, home loan packages often come with one annual fee. While this can mean paying fewer fees all up, this sum can be rather large - usually sitting at around $400.
Home loan package - is it worth it?
This ultimately comes down to your personal needs and budget. If a package is convenient for you and you’re going to use all the products in it, then it could be worth getting - just be sure that you’re happy with the rate and prepared to pay the annual fee. If you don't need the other products in the package besides the mortgage, and you can find a lower interest elsewhere, then a package home loan may not be worth it.
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Product database updated 14 May, 2024
