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Home loan features in a nutshell

As anyone who’s spent time shopping for a home loan understands, there’s more to a home loan than the headline rate. In this guide, we’ll run you through some of the features you should look out for to make sure your mortgage works for you.

Extra repayments

If a home loan comes with this option it means you can make additional payments on your mortgage on top of your regular repayments. This lets you chip away at the principal amount and pay less interest in the long run.

To illustrate how this might be helpful, say you have a home loan of $500,000 with a 3% p.a interest rate over a term of 25 years. If you decide to pay an extra $200 a month, you could save almost $26,000 in interest and shave two years and nine months off the life of your loan.

Both fixed and variable rate home loans can offer an extra repayments facility, though you’re more likely to find it on the latter. 

Among fixed rate loans that let you make extra repayments, many come with limits on how much you can repay each year. You’ll also need to be mindful of any break cost fees that might apply if you pay off the loan early.

To see how much you could save by pumping extra into your home loan, try our repayments calculator.

Redraw facility

The ability to make extra repayments on a loan usually goes hand in hand with a redraw facility. This lets you retrieve any extra repayments you’ve made to use for some other purpose.

Often homeowners will choose to redraw to cover expenses that arise further down the track, such as a home renovation, car upgrade, or new arrival in the family.

Just keep in mind that redrawing can negate the hard work you’ve done by making extra repayments. However, it’s often a more thrifty option than using a credit card or taking out a personal loan, as the interest rates on mortgages tend to be much lower.

Offset account

An alternative to making extra repayments is putting any extra cash you might have in an offset account. This is like a bank account attached to your mortgage. Any money in the account is offset against the home loan principal, meaning you’ll be charged less interest.

For example, if you have a $500,000 home loan and keep $50,000 in an 100% offset account, you will only be charged interest on $450,000.

Just like a bank account you can arrange for your salary to be deposited into the offset account, make online transactions, and pay bills. You’ll also receive a debit card from the provider for everyday purchases.

The reason many homeowners and investors opt for an offset account over using an extra repayments facility is because you can draw on that balance whenever you want without any limitations.

Split rate option

When you take out a home loan you can choose between a fixed rate, which is locked in for a set period of up to five years, or a variable rate, which fluctuates over time. But did you know you can have the best of both worlds?

A split rate loan lets you fix a portion of your home loan, which can provide some security if rates rise, while keeping the remaining portion variable, allowing you to take advantage of features like an offset account or redraw facility.

Interest only

Most people who take out a home loan will be paying back the principal (the amount borrowed) along with the interest charged by the bank for issuing the loan. However, there’s also the option to only repay the interest.

Interest only options are popular with investors, as they can claim the interest charged on their home loan come tax time. First home buyers might also benefit from paying just the interest, if only for a short period, as it brings down the ongoing repayment amount and makes it easier to budget.

Repayment schedule

Most home loans let you choose whether you want to make your repayments weekly, fortnightly or monthly. This means you can opt for the repayment cycle that best matches how often you get paid.

If you currently pay on a monthly basis, it might be worth switching to weekly or fortnightly repayments. Depending on how your lender calculates your repayments, it could mean paying off your loan faster.

For example, if you repay $1,000 on a monthly basis, this adds up to $12,000 a year. But if your lender calculates fortnightly repayments by halving the amount you’re currently paying monthly, $500 paid fortnightly would amount to $13,000 paid over the year.

Repayment holiday

Paying a mortgage over a 25 to 30 year period can be hard on your wallet and your well-being, and as with all things in life sometimes a little break is necessary. Thankfully, many lenders will let you take a repayment holiday for a limited period. 

A repayment holiday might come in handy if you currently have other commitments that demand your attention (e.g. changing jobs or raising a newborn). It can also help reduce the impact of any unexpected illnesses or injuries which demand you take time off work.

Just keep in mind that many lenders will only grant repayment holidays to borrowers that are ahead on their mortgage. What’s more, once the repayment holiday ends your lender will either extend your loan term or increase your repayment amount. So while it’s a good feature to have, it certainly isn’t free.

Home loan portability

If you need to move houses down the track, paying everything from the break cost fee (if you have a fixed rate loan) to the upfront application fee can be a pricey affair. Home loan portability lets you get around this problem by transferring your mortgage to another property.

Home loan top-up

If you’ve built up enough equity in your home, your lender might let you borrow more money via a home loan top-up. Just like when redrawing on your loan, you can use the top up feature to pay for big ticket items like renovations or a new car. 

Given that mortgage rates tend to be much lower, topping up your loan might be preferable to using a credit card or taking out a personal loan. 

Just keep in mind that a top-up involves renegotiating the terms of your mortgage. Along with the additional debt you’ll be taking on, which will increase the size of your monthly repayments, there might also be some fees involved.

Line of credit facility

A line of credit lets you access funds via your loan whenever you need them, up to an approved limit. The amount you’ll be able to borrow using a line of credit will generally be determined by the amount of equity you’ve built up in your home.

You'll typically be charged a higher interest rate and fees to use the facility. But once in place, you’ll be able to use it to fund just about anything, and you’ll only pay interest on the amount you borrow.

For an overview of home loans currently available, visit our home loan comparison page, or browse the selection below.

Home loan comparisons on Mozo - last updated 28 May 2024

Search promoted home loans below or do a full Mozo database search. Advertiser disclosure
  • Basic Home Loan

    Fixed, Owner Occupier, Principal & Interest, LVR<70%

    interest rate
    comparison rate
    Initial monthly repayment
    6.25% p.a.
    fixed 3 years
    6.20% p.a.

    No upfront or ongoing fees. Free extra repayments and redraw facility. Option to earn Qantas points. Min 30% deposit required. Borrow up to $750,000.

  • Discount Variable Home Loan

    Owner Occupier, LVR<70%

    interest rate
    comparison rate
    Initial monthly repayment
    5.99% p.a. variable
    6.01% p.a.

    A low rate home loan for owner-occupiers packed with great features including unlimited extra repayments, free online redraw, no application or monthly admin fees. Rate will vary depending on LVR. Winner of a Mozo Experts Choice 2024 Low Cost Home Loan Award^

  • Discounted Home Value Loan

    Owner Occupier, Principal & Interest, LVR 70-80%

    interest rate
    comparison rate
    Initial monthly repayment
    6.09% p.a. variable
    6.09% p.a.

    Enjoy competitive rates for owner occupiers. Enjoy unlimited free extra repayments. Flexibility to redraw additional payments for free. No ongoing monthly service fee. Settlement fee waived on new borrowings from $50,000 (T&Cs apply).

Niko Iliakis
Niko Iliakis
Money writer

Niko Iliakis is a finance journalist at Mozo specialising in home loans, property and interest rate movements. With an eye for facts and figures, Niko deep-dives into topics to help readers understand key info and make more informed financial decisions. He is ASIC RG146 (Tier 2) certified for general advice.

* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

^See information about the Mozo Experts Choice Home Loan Awards

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