Home loan guide
Which features do you need, and which ones aren't worth it?
The rate gets all the attention, but the features decide how the loan works day to day. An offset, redraw or extra repayments can save you interest if you use them. If you won't, you could be paying for nothing. I start with how you actually handle money: do you keep savings, pay extra, or need repayments to stay put?
This guide explains what each feature does, what it costs and when you are likely to use it.
Paying more than the minimum reduces the amount you owe, so less interest builds up. Even a regular extra payment can make a difference over a long loan term.
For a hypothetical $500,000 loan at 5% over 30 years, an extra $200 a month saves about $77,470 in interest and pays the loan off around 51 months earlier. This assumes monthly repayments, a constant rate, no fees and no redraws.
Variable loans often allow unlimited extra repayments. Fixed loans may cap them, and paying too much or closing the loan early can trigger a break cost. I check those limits before recommending a fixed term.
Read more: Home Loan Extra Repayment Calculator
An offset account is a transaction account linked to your home loan. Its eligible balance reduces the amount used to calculate interest. For example, with a 100% offset, a $300,000 loan and $50,000 in the linked account means interest is calculated on $250,000.
An offset reduces the interest charged on your loan rather than paying you savings interest. Tax treatment can differ if the property is an investment or later becomes one. Get tax advice before moving money between loan and offset accounts.
I'd consider an offset over redraw if you keep enough savings to cover its extra cost and want easy access. Most bank offsets work like a normal transaction account: your pay goes in and you spend from it with a card. With redraw, you're getting extra repayments back from the lender, and there can be minimum amounts, fees or a wait. Our offset versus redraw guide explains the differences.
Some offset loans have an annual package fee, a monthly account fee or a higher interest rate. An offset does not always require a professional package. Compare the actual fees and rates for each product.
For example, if an offset adds $400 a year in fees and both loans have the same 6% rate, an average balance of about $6,700 saves roughly $400 a year and covers that fee. If the offset loan has a higher rate, you need a larger balance to cover the extra cost.
Some loans let you link several offset accounts, so bills and savings stay in separate accounts while all of it reduces your interest. On the same loan, you won't save more with 5 accounts than with 1 on the same total balance, but it's easier to see what's spoken for. Our multiple offset accounts guide compares the lenders, how many accounts they allow and the fees.
Read more: What is an offset account?
Redraw lets you take back extra repayments you've made, within your lender's limits. Those repayments have already reduced your loan balance. Taking them back out increases what you owe again.
Extra repayments reduce your loan balance straight away. Your lender may let you redraw some of that money later, within the loan's limits.
Example:
The extra $500 keeps reducing your interest until you take it back out. Lenders can limit redraw, so don't treat it as guaranteed cash.
Using a redraw facility can help you save money and stay flexible:
Before using redraw, be aware of some restrictions:
Redraw is ideal for borrowers who:
With an offset or savings account, your money stays in a bank account. With redraw, you have paid it into the loan and need to meet the lender's rules to take it back. Compare access and tax treatment alongside the rate and fees.
Feature | How It Works | Benefits | Considerations | Tax Implications |
Offset Account | Linked to your home loan; reduces loan balance for interest calculations | Saves loan interest, with no tax on the saving for your own home; funds easy to access | Fees or a higher rate may outweigh savings on a small balance | Interest saved is not savings income; fees and any reduction in deductible interest affect the net benefit. |
Redraw Facility | Extra repayments reduce the loan balance; available redraw depends on the lender | Reduces loan balance and interest; encourages faster repayment | Limited access or redraw fees; less flexible than offset | Redraw is further borrowing; deductibility depends on how the money is used |
High-Interest Savings Account | Money in separate account earning high interest | Potentially higher interest rates; keeps savings separate from mortgage | Interest is taxable; may yield less net savings than offset | Taxable income reduces effective return; higher tax rates lower net benefit |
Which Option Is Best? | Depends on your goals and cash flow needs | Offset: easy access, no tax on the saving for your own home. Redraw: suits extra repayments you won't touch. Savings: earns taxable interest, kept apart from the loan. | Consider fees, balance requirements, and withdrawal flexibility | Consider personal tax situation for net benefits |
A split loan puts part of your debt on a fixed rate and part on a variable rate. The fixed part gives you more certainty about repayments during that term. The variable part can give you more freedom to make extra repayments or use an offset.
I would consider a split if you want some repayment certainty but expect to keep savings or pay extra. The right split depends on how much flexibility you'll actually use.
Compare the rate, fees and extra-repayment limits on each split. The fixed portion can restrict changes during the fixed term.
Interest-only loans let you pay just the interest for a specific time. This means your monthly repayments are lower.
Interest-only repayments may help with short-term cash flow, but the principal does not reduce during that period. Investment-loan interest is not automatically deductible: the use of the borrowed money matters.
At the same rate and loan term, interest-only repayments usually increase total interest compared with principal-and-interest repayments. Repayments can rise sharply when the interest-only period ends because the principal must be repaid over the remaining term.
Many loans offer weekly, fortnightly or monthly repayments. Paying half the monthly repayment every fortnight makes 26 half-payments, equivalent to 13 monthly repayments a year. A lender's standard fortnightly amount may be calculated differently, so check it before assuming you are paying extra.
Match repayments to your payday if that makes budgeting easier. Check the lender's repayment calculation before counting on an interest saving from changing frequency alone.
Check to see if you are eligible for a home loan
Some lenders offer an agreed repayment pause or hardship arrangement. Contact the lender before changing repayments; a missed payment is not an approved holiday. Interest may continue to accrue, and the lender should explain what happens to the balance, term and later repayments.
A line of credit home loan allows you to borrow money up to a certain limit when you need it. It works like a credit card. You will only pay interest on the amount of money you have taken out.
This feature can help you with your renovations or other projects. You might need money bit by bit over time for these tasks.
A line of credit can have higher rates and fees. Check how you will reduce the balance: flexible access can make it easier to keep borrowing without repaying the principal.
Some lenders let you substitute the property securing your loan when you move. The lender must approve the new security and any changes to the borrowing. Valuations, fees and settlement timing still matter; simultaneous settlement is one possible arrangement, not a universal rule.
A package may offer rate discounts or waive particular fees in return for an annual charge. The fee and benefits vary by lender and product. Compare the total cost with a basic loan rather than assuming a package is cheaper above a particular loan size.
Our NAB and CommBank reviews explain features to check when comparing lenders.
The same feature can work differently on a fixed, variable or split loan. Before choosing a product, check which part of the loan gets the offset benefit and how much extra you can repay.
Feature | Variable Loan | Fixed Loan | Split Loan |
Offset Account | Depends on product | Limited | Usually variable portion; check product |
Redraw Facility | Flexible | Limited | Usually variable portion; check product |
Repayment Flexibility | High | Limited | Partial flexibility |
Interest Rate Risk | Can go up or down | Fixed | Mixed risk |
Compare the features you expect to use, then check their limits against your savings and repayment plans.
Not all home loan features are as simple as they seem. Some come with hidden costs or restrictions that can affect your budget and savings.
A low headline interest rate may look attractive but doesn't include fees, restrictions, or missing features. Always consider:
Check the fees and access rules against how you plan to use the loan before accepting the offer.
I start with the way you use your money, then compare what each feature costs. There's little value in paying for several features if you'll only use 1.
A broker can explain the loan offer, fees, product terms and relevant target market determination. Start with the features you will use and what they cost.
Choose the features you expect to use, then compare their cost with the saving or flexibility they provide.
Call us on 1300 088 065 or complete a free assessment to speak with one of our home loan experts.
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This is a hypothetical example, not a client result. On a $640,000 loan, a constant $20,000 balance in a 100% offset means interest is initially calculated on $620,000. At 6%, that balance reduces interest by about $1,200 over a year before fees, assuming it remains there and the loan balance stays above it.
The total saving and payoff date depend on future rates, repayments, withdrawals and fees. Use the mortgage calculator to compare your own assumptions.
Buying your first home? Our Australian Government 5% Deposit Scheme guide explains the low-deposit options, and our first home buyer grants guide covers grants and concessions.
Tell us your price range and deposit and we will check which options and participating lenders fit before you apply.
Tell our team which features you expect to use and how much you normally keep in savings. We can compare the rates, fees and access rules for suitable loans.
If you want to get started, please give us a call on 1300 088 065 or book a free assessment online to see how we can help.
