Packaging your mortgage with a credit card and bank account can save you thousands of dollars over the life of your loan, but are you really better off? Jackie Pearson investigates.
There are clear advantages for bundling your home loan with an every-day account and credit card including 0.7 percent p.a. off a standard variable rate. Also, there is the convenience of having all your banking in the one tidy package.
But compared to other home loans and accounts on the market, the package deal may not be the best choice for everyone.
Are package deals cheaper?
hen comparing the annual costs of a typical package to individual products, it is possible to beat the package deal but only if you combine a low rate home loan with a no-frills credit card ($50 annual fee) and a simple transaction account.
For example, the total annual fees for an average transaction account with a $5 monthly fee, a no-frills credit card and a MyRate Standard Variable home loan with an advertised interest rate of 5.03 percent p.a. for the average $270,000 home loan over 25 years, is $259 cheaper per year than a typical package.
However when comparing a typical package with a home loan variable interest rate of 5.04 percent p.a. and a $350 annual fee, against an average standard variable home loan of 5.74 percent p.a., with a typical transaction account and a standard gold credit card with a $150 annual fee, the typical package is about $1,303 per year cheaper than the three accounts combined.
The difference in savings is about $32,579 over 25 years.
What’s in it for the lender?
Managing director of MyRate Home Loans, Kevin Sherman says packages are designed to lock customers in.
“First off they make you feel special because you are getting a ‘professional package’ home loan that not everyone can qualify for,” he says.
“By rolling in all your other banking needs they are also making it more inconvenient for you to leave, not impossible but pretty inconvenient.”
That’s why Sherman says packages don’t always represent the best value for money. “I would have to say stand alone products offer better value as each component is usually better priced. Consumers will have more flexibility to chop and change as better deals become available.”
However, NAB Personal Banking general manager of mortgages, Steven Shaw, says you have more room for negotiating a better deal with more accounts in the one shop.
“Buying separately generally means you cannot access the same discounts and features.”
Nevertheless, a home loan with a well-structured and priced package can offer considerable savings when compared with a stand-alone standard variable loan, a standard $5 per month fee transaction account and a gold credit card.
Package deals are worth including in your comparison when shopping around for the best home loan. Keep in mind the difference in features that the different loans offer as home loans in package deals may not include features you require.