Reduce Home Loans Rate Buster Loan Review

Sally Tindall
Jul 14, 2016( 7 min read )

The basics

Reduce Home Loans is an Australian-owned online non-bank lender offering customers a diverse set of home loan options to cover a range of borrowers’ unique requirements.

For those who value a competitive interest rate along with repayment flexibility and the opportunity to include additional features, the Reduce Home Loans Rate Buster loans is worthy of further review from owner-occupiers, first home buyers and refinancers.

A selection of variable rate loans is offered under the Rate Buster brand, giving owner occupiers and investors different combinations of rates and features to consider. Depending on the loan package you choose, the Rate Buster loans provide some of the features of a fully featured home loan such as: a 100 per cent offset, redraw, loan portability, split loan facilities, additional repayments and repayment flexibility. The eligibility requirements for each loan vary to suit borrowers with different deposit amounts. Rate Buster’s lowest variable rate requires a 20 to 30 percent deposit, with higher rates available for customers looking to borrow up to 95 per cent of the property value.

Owner occupiers with larger deposits are generally seen as lower risk and therefore avoid the additional costs of Lenders’ Mortgage Insurance. So, if you are a first home owner, investor or looking to refinance, it’s worthwhile negotiating with the lender to get the best rate possible.

More specific information on Reduce Home Loans Rate Buster Loan is available here.

The highlights

One of the key benefits of the variable loan is the option to include a 100 per cent offset facility.  When the loan is linked to a mortgage offset account, the interest is calculated daily on the total outstanding loan amount less the total funds in your offset account. This is a great way to reduce the interest charged on your mortgage and can help you save thousands in interest payments over the life of your loan. An offset account is not included as a standard feature in all of the Rate Buster Variable loans, so it’s worth reviewing each loan in detail if an offset facility suits your personal circumstances.

Many fully-featured loan packages include the option of loan portability, which allows customers to move with their mortgages. Depending on the specific Rate Buster loan you choose, you can transfer your existing loan to another property without the need to refinance, and avoiding repaying a number of upfront costs, such as mortgage application and establishment fees.

As an additional feature, Reduce Home Loans offers to reward your loyalty with a discount. Depending on the mortgage you choose, you may be eligible for a discount after five years of good payment conduct.

If you are in a position to make additional repayments on top of your minimum loan repayment, you can significantly reduce the length and cost of your loan, helping you to get to ‘mortgage free’ that much sooner. All of the loans in the Reduce Home Loans Rate Buster Variable range allow you to make additional payments on your home loan without incurring any additional charges.

Subject to the specific Rate Buster loan you are considering, you can benefit from a redraw facility, which allows you to get hassle-free access to any additional payments you have made on your loan. The redraw facility is fee-free with no minimum amount required for online withdrawals.

Depending on the package you choose, your Rate Buster loan gives you the opportunity to split your loan between variable and fixed rates – providing you the best of both worlds. This can benefit those customers wanting to balance the risks of interest rate movements.

Reduce Home Loans maintains that it is able to offer very competitive rates by keeping its overheads lower, with no bricks and mortar branches. It offers a personal finance manager to help you through the initial application stage of the loan, after which, customer service is provided through online, email, phone and live chat contact. If you are already accustomed to accessing your bank almost exclusively via your mobile device, then you will find the online lender experience a natural step. For other customers looking for a change from the mainstream banks, but who still like the security of the local branch – this may be a deal breaker.

The lowlights

All the Rate Buster variable loans are offered with no establishment fees, and no annual package fees. You will however need to budget for a hefty combination of application fees, set-up fees, valuation, legal and settlement fees. As a rule, it is good practice to check for the latest deals and negotiate your best outcome based on competitive alternatives.

Reduce Home Loans offers its most competitive rates depending upon your circumstances and the amount you wish to borrow. The lowest rates are available for the owner-occupier standard variable loan when you have a deposit of 20 per cent of the value of the property. For many borrowers, this deposit hurdle may be difficult to achieve. If you are looking to borrow from 80 per cent up to a maximum of 95 per cent of the property value, other Rate Buster loans may be more suitable. Bear in mind, with deposit amounts less than 20 per cent you may not qualify for the lowest rate, can pay a higher interest rate, and be required to pay Lenders’ Mortgage Insurance. As always it is important to check as to your specific circumstances and suitability.

Despite being a no-fuss online lender, the Rate Buster Variable loans are not low doc loans. This means you need to provide a complete range of personal and financial information along with employment details in order to have your application processed in the normal timeframe. This can be an issue for some self-employed customers who are looking for a non-major bank, low doc loan option.

If you want repayment flexibility, the Rate Buster loans provide you with some freedom to set your repayment frequency at fortnightly or monthly, to work in with your income and budget – however this applies to principal and interest payments only. A weekly payment option is not offered, and the interest-only feature is restricted to the Investor Variable loan, which is available for investment purposes only.

The verdict

If you need your loan to come with a competitive rate and a want to integrate some features including 100 per cent offset, redraw, loan portability, split loan facilities, additional repayments and repayment flexibility, you can find these in Rate Buster loan variations. Keep in mind that not all features are included in all of the Rate Buster loans – so it’s important you take the time to review all the features, costs and exclusions across the different variations.

The Reduce Home Loans Rate Buster loan will not suit customers more accustomed to a traditional branch relationship. The attractiveness of the low rate may not be enough to offset the peace of mind that comes with a more personal banking experience.

However, if you are comfortable with digital banking and prefer a loan with a sharp price, features, flexibility and convenience, then Reduce Home Loans’ Rate Buster loans could be a good match for your home loan objectives.

The bottom line

Choosing a home loan is a huge decision and one that may have implications for two or even three decades, so it is important you take the time to do your due diligence to determine if this loan package is a good fit.

It’s all a matter of finding the home loan that will be the best match for your individual circumstances.

If you are in any way unsure it could be worthwhile seeking professional financial advice to determine if this product is the right one for you.

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.

About the author

Sally Tindall

Sally Tindall is RateCity's Money Editor.

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