What is a package home loan? Well, package banking essentially means packaging a bundle of your financial product needs together. This can include:
- Your home loan
- Your credit card(s)
- Your line of credit accounts
- Your deposit accounts
- Your home & contents insurance
- Your car insurance
- Your life insurance
So there’s a convenience factor with package banking, in having one financial institution and hopefully one contact point for all those banking needs.
Apart from the convenience of bundling your banking together though, the real hero of package banking is the discounted home loan rate that generally applies. This can be up to 0.70% off the going standard variable rate for the life of the loan. With mortgage rates (still being) so low, the impact of the package discount has to be even more significant (when viewed as a component of the overall interest cost). You may end up with a relatively cheap home loan rate once the package discount is applied.
The trade off for a discount on a home loan is the annual fee. It can be steep – often around $395 – but it encompasses all products in the package.
Of course, the larger the home loan the less the annual fee appears in comparison. The value of the package to an individual lies in the overall savings made when the simple cost versus savings maths are done.
Standard Variable versus Package Interest Rates
Let’s look at some examples of how you might save by having a package home loan.
Currently on Canstar’s database, the minimum, maximum and average home loan interest rates are as follows:
|Basic Variable||Standard Variable||Package Variable||3 Year Fixed||5 Year Fixed|
Based on products on Canstar database, as at 17/12/15
So the average package rate is 0.31% lower than the average standard variable rate. On a $500,000 home loan over 25 years, the difference in average standard variable and average package rate equates to a saving of around $89 per month. On that basis, an annual package fee of, say, $395 would only take a little over 4 months to clear. And that doesn’t take account of any other discounts or fee waivers.
Try our Home Loan Comparison Calculator to get an idea of what’s going to work out better for you financially.