What is a home loan package?

A home loan package may offer a variety of benefits – but it can come with a price. It’s worth understanding the advantages and risks of a home loan package before you sign on the dotted line. 

When you first choose your mortgage, you may be tempted to opt for a no-frills basic home loan option just to get your foot on the property ladder. And whether you’re considering refinancing to a more flexible option or want to know more for your first home loan, it’s worth understanding what a home loan package is and how it may benefit some customers.

What is a home loan package?

A home loan package is a mortgage that is linked to other financial products, such as a credit card, an offset account, a savings account, or a bank account. As the name suggests, the home loan is offered as a package deal with other financial products. 

Home loan packages can cover many different product but typically cover the following:

• Savings accounts (including mortgage offset accounts)
• Bank account
• Credit card account
• Insurance products

Some lenders may also offer a discounted home loan interest rate by opting for a home loan package deal, so it’s worth comparing the interest rate when choosing your best mortgage option. 

What are the benefits of a home loan package?

A home loan package may offer greater financial simplicity for some home loan customers as many of your financial products will be held by the same lender. For example, if you’re the type of person who likes having one banking app that shows you exactly what is outstanding for your home loan and credit card, as well as what is in your savings account, opting for a package home loan may help to streamline your banking.

You may also be able to add some flexibility to your mortgage, particularly if you started with a no-frills basic home loan, as a home loan package may come with a linked offset account. An offset account is a home loan feature that may help borrowers to reduce the interest payable on their mortgage repayments.

You may also find the lender is willing to offer home loan package customers a discounted variable or fixed interest rate than their standard variable rate, to encourage them to sign up to more financial products than just the home loan. As interest charges are a significant cost associated with a home loan, reducing your interest with a discounted rate may help you to lower your mortgage repayments.

What are the risks of a home loan package?

It’s worth keeping in mind that while a home loan package may offer you more financial products than your standard home loan, you’re also more likely to pay a lower interest rate on average for a basic home loan. After all, this is why many first home buyers opt for this home loan type to begin with before refinancing to a package. This may differ depending on the lender, so it’s worth comparing interest rates of different home loan options offered by said lender.  

Also, as you’re choosing to sign up to multiple products from one lender, you have less choice over your finances. You are not able to fully compare your options against the market to ensure you’re getting the best deal for your needs and financial situation.

For example, a lender may offer a competitive home loan package deal with a lower-rate home loan, but the interest offered on their savings account may be rock- bottom, or the credit card may offer no interest-free days, compared to its competitors.  If you’re considering a home loan package, be sure to compare all products being offered and not just the home loan. 

Further, some home loan lenders will charge higher-than-average annual fees on home loan packages. Home loan packages may come with some rate discounts but there could be other ways a lender increases costs compared to a more-basic home loan option. Be sure to read the product disclosure statement to be across the true cost of the loan, including any fees charged.

Whatever your home loan goals are, it’s always worth comparing your options thoroughly to ensure you’re choosing your best mortgage. 

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