With the IMB Budget Home Loan, you can take advantage of competitive variable interest rates, especially if you have a larger deposit. Moreover, you won’t pay any ongoing fees, allowing you to keep down costs on the loan.
IMB offers some features which allow you to reduce interest costs on the loan such as the ability to make unlimited extra repayments. Once established, there are no ongoing monthly fees. You can similarly split your loan between variable and fixed-rate portions.
You’ll also have the benefit of doing business with a member-owned financial institution. Established in 1880, IMB, or the Illawarra Mutual Bank, has branches in NSW, the ACT and Melbourne. IMB redirects some of its profits back into the community; the IMB Community Foundation was established in 1999 and has since provided $7.6 million to support more than 500 projects.
But if you’re a borrower, cost will remain your main consideration. So you’ll need to do a full review of the pros and cons on this loan to work out whether it is the best one for you.
Review of the highlights
The IMB Budget Home Loan is definitely a low cost home loan and offers a decent discount off IMB’s standard variable rate for the life of the loan. One of the main attractions is that there are no ongoing fees, though only owner-occupiers can apply.
A big drawcard on this home loan is that IMB rewards borrowers who have bigger deposits with lower interest rates. In particular, IMB charges the lowest rates where the home buyer has a deposit of 20 per cent or more. A slightly higher rate applies to loan amounts between 80 and 90 per cent. IMB charges the highest rates to loans equal to or greater than 90 per cent of the property’s value. Another plus is that you don’t need to pay for lender mortgage insurance (LMI) to get this much, which is a real bonus as most lenders will charge LMI if you borrow over 80 per cent of the property’s value.
The loan offers some basic essential features allowing you to keep interest costs down. Borrowers can, for example, make unrestricted additional repayments and free redraws on these payments, via online and mobile banking. Customers can make weekly, fortnightly or monthly repayments to suit their income, with more regular repayments allowing interests costs to be minimised.
You can take the loan for up to 30 years for principal and interest repayments. Borrowers can also repay interest-only for up to five years and those interest-only periods can be broken into separate time periods, cumulative over the term of the loan, so long as they don’t total more than five years. That gives you some flexibility to structure repayments according to your needs.
You can split part of your variable loan with a fixed rate loan. By having a portion of your loan fixed and the remaining portions variable, you can protect yourself against rising interest rates. At the same time, you can use the flexibility of the variable portion to help pay off that part of the loan faster.
Fixed terms are available from one up to five years, with a choice of principal and interest or interest only repayments, again up to five years. IMB also allows weekly, fortnightly or monthly repayments.
A flexible feature of the IMB fixed loans is that you can make up to 12 months additional repayments in advance on the fixed part of the loan without penalty, allowing you to save on interest costs. The minimum fixed loan amount is $10,000 and owner-occupiers can borrow up to 95 per cent of the property’s value without having to pay for LMI, again a distinguishing feature as other lenders usually insist on LMI where more than 80 per cent of the property’s value is borrowed.
But IMB takes care of this through varying interest rates, depending on how much you borrow. Again, IMB rewards fixed-rate borrowers with bigger deposits with the lowest interest rates. Where the amount borrowed on the fixed loan is less than 90 per cent of the property’s value, a 0.65 per cent discount applies on a one-year loan and an even bigger 0.86 per cent discount applies on two-year fixed rate loans. On three-year fixed loans, you’ll pay 0.86 per cent less where you have more than a 10 per cent deposit, 0.60 per cent less on a four-year loan and 0.80 per cent less on a five-year loan.
Another bonus of dealing with IMB is more personal service. If you visit their website, depending on where you live, you can make an appointment to see a mobile lender by simply filling out an online form and an IMB consultant will get back to you within one business day to arrange an appointment.
Moreover, IMB members enjoy access to over 3,000 ATMs that are free from direct-charge fees if they go through Westpac, St George, Bank of Melbourne and BankSA ATMs. IMB also offers free automated phone and internet banking, offsetting any impact from a limited branch network.
Specific product information on this loan can be found here.
Review of the lowlights
The IMB Budget Home Loan caters just for owner-occupiers buying a new home. The loan is not available to investors or as a switch or refinance from another IMB home loan, which limits its suitability.
While you can redraw, the minimum amount is a relatively high $500 which make this feature slightly inaccessible. And if you make the redraw in an IMB Branch, you’ll pay a $50 fee per redraw. Having said that, you can easily avoid this fee by managing your home loan online.
Moreover, no offset account is available with this mortgage. So if you do have excess savings in your transaction account, they won’t work to offset the home loan principal and help you reduce interest costs unless you actually make a repayment. This disadvantage is lessened, to some degree, by having the ability to make unlimited extra repayments.
Another possible downside to having a fixed rate loan is that you will pay an ongoing monthly fee, though it’s a relatively modest amount of $6 a month.
Also, if you’re after a wide branch network, IMB doesn’t offer it as it is a smaller lender. IMB’s branch locations are limited to suburbs in Sydney, the NSW Central Coast, Melbourne, and certain suburbs in the Australian Capital Territory. But IMB can be contacted via email or by phone with its locally based call centre from 8am – 8pm on Monday to Friday and 9am – 4am on Saturday from anywhere in Australia. IMB also offers a ‘Live Chat’ option on their website that works instantaneously. Having said that, its service centre doesn’t extend to 24/7, which is what some of the bigger bank lenders offer. But not everyone needs this.
The verdict after review
The IMB Budget Home Loan is targeted at owner-occupier buyers looking for low interest rates and no ongoing fees. While the IMB Budget Home Loan lacks some features other fancier variable loans offer, such as an offset account facility, if you’re on a tight budget and don’t have much spare cash, then this may not make much difference to the cost of the home loan.
Indeed, there are other ways you can reduce interest on your mortgage such as making extra repayments as often as you can and IMB won’t charge you. You don’t need fancy features to save money on a home loan – and you usually end up paying for them in the end through ongoing and hidden fees, which this loan doesn’t have.
Moreover, the ability to borrow up to 90 per cent of a property’s value on a variable loan and up to 95 per cent on a fixed loan without having to pay to have for LMI is a real bonus as most lenders will charge for such insurance if you borrow over 80 per cent of the property’s value.
All up, the loan is worth considering, especially if you have a larger deposit as you can really take advantage of some decent interest rate discounts. But do your sums after a full review and don’t forget to include the relatively high upfront fee on the fixed and variable loans. But that will be offset by other features which make it worthy of consideration for owner-occupier buyers.
Note: This review provides general information about the above home loan. Any views expressed are the author’s own. It is not intended to be a recommendation of a particular product. To the extent that this commentary may constitute general advice, this advice is of a general nature and does not take into account your individual objectives, financial circumstances or needs. We recommend that before you make any financial decision you seek professional advice from a suitably qualified adviser and read the PDS. Read more about our important disclosures here.