With a borrowing limit of up to $750,000, this single, variable rate home loan account is portable and offered to owner-occupiers and refinancers only. Its traditional 30-year term keeps repayments relatively low although as a pay-off, you’ll end up paying more interest over the life of the loan compared to shorter terms. Borrowers can request to change to a shorter loan period from Yellow Brick Road after settlement.
Living up to its name, the Rate Smasher Home Loan offers borrowers a highly competitive variable interest rate compared to what’s on the market. This is most apparent when you examine the loan’s comparison rate, instead of the advertised rate, alongside other lenders. The Rate Smasher Home Loan has very few fees – specifically, no ongoing account management fee, no valuation fee, no extra repayments fee, no redraw fee and no application fee. The only charge passed on to borrowers is a documentation fee that includes GST, and a mortgage discharge fee when you finish paying off your loan. This means that although the Rate Smasher Home Loans’s advertised rate is similar to many of the lower variable interest rates offered, its comparison rate – a percentage that combines an interest rate with the fees and charges attached to that loan – is very competitive, making this loan a firm contender if you’re looking for the sharpest comparative rate on the market.
The Rate Smasher Home Loan is also a very simple loan, which can be appealing if you don’t want the fuss of dealing with extra facilities, lines of credit and different accounts – or the fees that often accompany them. Getting a single account can allow you to focus on making your repayments, while offering you a limited amount of flexibility. With the Rate Smasher Home Loan, borrowers can make an unlimited amount of additional repayments without incurring any cost, enabling you to pay down your loan faster if, for example, your income increases or you have some savings handy. You can also redraw money from your existing balance for free – a valuable facility to have if you want to take out money to pay for renovations, debt or other expenses. Keep in mind, though, that this option can only be accessed through Internet banking. Manual redraw through an ATM or branch is not available with the Rate Smasher Home Loan.
Accessing Yellow Brick Road’s financial guidance services may be another benefit for some borrowers, especially those who would like advice and general financial coaching when applying for a loan. The non-bank lender has branches all around in Australia and describes itself as a full-service wealth management company that covers home loans, insurance, superannuation, investments and financial planning – giving “all Australians access to quality financial advice”, according to the website. Borrowers who apply for a loan are given one ‘go to’ person to address any particular circumstances and needs, as well as a free obligation-free consultation to assess your financial situation.
The firm also offers what it calls ‘Guru’ services: an online platform and financial coaching service that provides personalised guidance on how to manage your finances, grow wealth, and map out your financial future. This may be a helpful service to add to your home loan if you’re unsure about how to manage your mortgage repayments. It’s worth noting, though, that the firm’s coaches, who guide people through the initial stages of the Guru process, are not necessarily qualified financial planners. If you’re after more thorough advice, you may prefer to seek the help of an independent financial planner instead.
More information about the Rate Smasher Home Loan can be found here.
The Rate Smasher Home Loan won’t meet everyone’s needs, nor is every borrower eligible.
You need at least a 20 per cent deposit in order to qualify for the loan, making it only suitable for people who have a large amount of savings ready to go, or a good amount of equity in an existing property. Applying for this home loan may also be difficult if you own a business: self-employed borrowers must have been in business for a minimum of two years when applying for a home loan; if you earn a PAYG contract income, the minimum amount of time spent in employment is twelve months. It’s also worth noting there is no low doc option available on this home loan, nor is the loan available to investors.
The Rate Smasher Home Loan is also a very simple loan without many of the features that can work to your advantage. There is no offset account or line of credit available with this loan – a downside for borrowers who may want to reduce their interest. Payments are principle and interest, with no option for interest only payments if you need to take a break from making full repayments. Other features are only made available if you switch to a different product. If you’re building a new house and want to take up a construction loan, or if you want to fix your interest rate and move to regular repayments, you need to move to Yellow Brick Road’s Empower range of home loans, which has a higher interest rate.
Another drawback is a lack of options when it comes to the practicalities of making payments and dealing with transactions. As they are not a major bank, Yellow Brick Road has limited facilities connected to their home loan. Although phone and Internet banking is available with the Rate Smasher Home Loan – a feature that will suit those who enjoy the convenience of electronic banking – this won’t suit all borrowers, especially those who are more comfortable with physical transactions. Loan repayments can only be made via direct debit or salary credit. If you want ATM access, a cheque book facility or the ability to make over-the-counter deposits at Australia Post, you need to switch to Yellow Brick Road’s Empower package, as these options are not available with the Rate Smasher Home Loan.
If you’re looking for a straightforward, no frills home loan that offers minimal fees and a competitive variable interest rate, Yellow Brick Road’s Rate Smasher Home Loan may be a suitable option. With a favourable comparison rate and no ongoing charges, this home loan offers both simplicity and savings with financial guidance as a valuable extra, should you choose to pay for this service.
On the other hand, if you would prefer a loan that allows you to create wealth, or you think you may need to change your loan structure down the track, you may want to consider other home loan options with a wider range of features. While a single account home loan may offer you a competitive interest rate, its lack of features may come back to bite you if your circumstances change and you want to adapt your loan to suit your needs.
Whatever your preference, it’s a good idea to compare not just home loan interest rates, but also the features on offer and what the loan allows you to do. Looking at each product as a whole will help you find the loan that best suits your needs and helps you to achieve your home ownership goals.
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.