When you compare home loans, you'll see two broad types: basic (or "no frills") loans and package loans. One is simpler and cheaper; the other bundles features for an annual fee. Neither is always better.
Basic home loans
Typical features: - Competitive interest rate - Little or no ongoing fees - Extra repayments and redraw - Often no offset account
Suits you if: - You don't keep much in savings - You want a simple, low-cost loan - You won't use extras like credit cards or multiple splits
Package home loans
Typical features: - Annual fee, often around $395 - Rate discount, sometimes larger for bigger loans - One or more 100% offset accounts - Fee-free credit card (annual fee waived) - Discounts on fixed rates or other products - Multiple loan splits without extra fees
Suits you if: - You keep savings that can sit in an offset - Your loan is large enough that rate discounts matter - You'll use the extra features
Doing the maths
Here's a simple way to compare.
Basic loan: 6.44%, no annual fee, no offset Package loan: 6.29%, $395 annual fee, full offset
On a $600,000 loan: - Rate difference saves about $706 a year in repayments - Minus the $395 fee: package is about $310 a year cheaper - Plus the offset: with $20,000 in offset, you save about another $1,300 a year
For this borrower, the package wins clearly.
On a $250,000 loan with no savings, the rate saving would only be about $290 a year, less than the fee. The basic loan wins.
Watch for
- Fee changes: lenders can increase package fees
- Credit cards you don't need: a fee-free card still affects your borrowing power through its limit
- Rate creep: discounts on packages can erode over time for existing customers
Can you switch between them?
Usually yes, with your current lender. Moving from basic to package to get an offset, or package to basic to save a fee, is often a simple product switch.
Frequently asked questions
Is the package fee charged per loan?
Usually per package, covering multiple loans and splits.
Do package loans cover investment loans?
Often yes. One package can include owner-occupied and investment loans.
Is the fee tax deductible?
For investment loans, the portion relating to investment borrowing may be deductible. Ask your accountant.
Not sure if a package is worth it for you? Call Finfident on 02 6416 2142, or Call, Text or WhatsApp 0424 545 654 and we'll do the maths on your loan.
Want to know if this applies to you?
Talk it through with a Finfident broker. It's free and there's no obligation.
