Australian mortgage holders could make big savings over the life of their home loan by bundling their finance products together in the right package home loan.
The term ‘package’ refers to combining a home loan and other commonly-used financial products into one bundle with one financial institution. Usually, a package home loan comes with the option to have a mortgage offset account, deposit accounts, credit cards and discounted insurance options, as well as discounted financial planning and share trading.
The key savings factor in every package home loan is the discounted home loan interest rate – according to Canstar, the market average residential standard variable package home loan rate is currently discounted to 4.16%, compared to a market average stand-alone home loan rate of 4.56%. The impact this could have over the 25-year life of a $350,000 home loan equates to $23,656 in interest savings. After factoring in that package home loans often have an annual fee, the average being $289, the total savings could still add up to an impressive $19,250 over the life of the loan.
However, the savings can be even greater depending on the package home loan. The difference between the highest and lowest interest rate for a $350,000 package home loan is 1.2%. That adds up to savings of $70,500 over the 25-year life of the loan.
It’s easy to see that the possible savings can quickly outpace the annual fee charged for the package. The bulk of these savings come from the interest rate discount that applies for the life of the package, however, it’s important to know that these discounts can vary considerably between lenders and depending on how much you borrow.
What many people don’t realise is that packages come with other fee and ongoing cost waivers across everyday banking products such as credit cards and transaction account, as well as a range of product discounts on items such as insurance, financial planning and share trading.
To see how the savings stack up, Canstar has compared an estimated savings scenario on a package home loan and its included products against stand-alone products, using everyday products alongside a home loan such as transaction account, credit card, home & contents insurance and car insurance. Based on an average loan amount of $350,000 over 25-years with monthly repayments and the average interest rates of the major banks, this research found the following savings may be possible:
There’s no doubt you can save a bundle with a package home loan, provided you use the loan and accompanying products in the correct manner. Packaging up your banking products is not for everyone. In certain circumstances, you may be better off with a cheaper stand-alone product that serves your purpose. There’s no substitute for doing your sums first.
If you do decide that a package home loan is for you, then it’s worth comparing your options. After scrutinizing 31 Package Home Loans from 29 lenders, the latest Canstar Star Ratings research results show there are currently three 5-Star Rated package home loans that offer outstanding value.
The 5-Star Rated package home loans are:
-ANZ Breakfree Package
-Newcastle Permanent Premium Plus Package
-Westpac Premier Advantage Package
See more here: http://www.apimagazine.com.au/property-investment/aussies-save-big-with-package-home-loans-