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How to tailor a home loan for you

How to tailor a home loan for you

If you’re in the market for a home loan and unsatisfied with the standard offering, don’t despair – some lenders provide customised home loans.

Customised home loans are tailored to individuals who don’t need or want all the options of standard home loans or want something extra thrown in. They also suit people who have a different risk profile, such as the self-employed.

“Or it may suit customers who are looking for specific features and are willing to pay [more] for these, or alternatively a simple loan with minimal features and minimal cost,” says Sally Bruce from NAB.

“In many instances, institutions have tried to address the needs of customers by offering a specific type of home loan or a home loan package to ensure customers are getting a product matching their needs, but also paying a fair value.”

For example, NAB’s Base Variable Rate home loan for those who want a low on-going rate but don’t want to pay a monthly or annual fee. You can also make interest only repayments and redraw funds if you’re ahead of your payment schedule.

NAB’s Tailored Variable home loan also has the option of fixed or variable interest rates and is one of the bank’s most flexible home loans.

At Westpac, every home loan is customised, according to the bank.

“This is because every customer wants something different from their loan – some people want a competitive fixed rate [and] some people want to link their loan to a mortgage offset, while others are looking for product loyalty discounts,” says a Westpac spokesperson.

However, the bank does have a specific tailored home loan in the Premier Advantage Package.

“Customers are becoming more discerning when shopping for a home loan – they know to look beyond the simple headline price and instead look for the home loan product which offers them the best overall value,” the Westpac spokesperson says.

The Premier Advantage Package allows you to increase your loan, gives you access to a fully transactional mortgage offset account, access to a range of annual fee-free credit cards, no account keeping fees on savings accounts and discounts on other products, such as home and contents insurance.

The downside

There are drawbacks of customised home loans, however. Because some offer extras, other options may be taken away, such as access to fixed interest rates. You are also more likely to pay higher interest rates for the add-ons, which could see you pay a lot more for your loan if you don’t maximise the potential savings of a customised home loan.

For example, the interest rate of 7.67 percent for the NAB Tailored Variable compares to the lowest variable rate home loan on RateCity’s website – the Loans.com.au Dream Loan Express Variable, which has an advertised  rate of 6.69 percent.

“The type of home loan that will best suit a customer will depend on their individual circumstances and may vary over time,” says NAB’s Bruce.

So before you sign on the dotted line, make sure you know the exact type of home loan you want and the features you can and can’t live without. Some lenders may even customise a package especially for you.

Don’t be tempted to go for the home loan with the lowest interest rate. In the long run, you may end up paying more, so always compare home loans and any savings you might make.

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