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Getting more from your package home loan

From free offset accounts to discounted online share trading, home loan providers are currently offering a range of enticing products within packages in a bid to win more business. But how do you keep your eye on what is important when looking for the right package?

Many financial institutions offer their home loans with the option of a packaging the loan with other financial products. This can allow you to realise benefits such as access to fee waivers for a transaction or offset account, credit card with annual fee waived, discounts on insurance, discounted or free financial planning sessions and even discounted share trading. But are you really getting a better deal when you opt for a package over selecting products individually?

Canstar’s Group Manager of Research Mitch Watson said it was important consumers considered what products were most important and suited to their particular circumstances, and didn’t fall into the trap of signing up for products just because they were on offer.

“If you want to earn rewards or frequent flyer points, looking for packages that waive the annual fee on premium cards could be a good place to start,” Mr Watson said.

“However, if a lower rate on your home loan is your priority, you should still consider providers who don’t offer rewards cards, as they may be able to provide more competitive rates.

“While it is good to get discounts on other products, such as insurances, these are only worthwhile if it makes the product better value than you would receive elsewhere, so it is always important to weigh up the benefits that you are receiving, and shop around for the best deal”.

Packages are available on both variable and fixed rate loans and Canstar’s analysis for 2018’s 5-Star ratings found an average package fee for an owner occupier loan of $385. Opting for a package also generally results in interest rate discounts of around .7%, or .8% off a standard variable rate for a $350,000 loan, sometimes more for larger loans.

The average savings and costs for a package home loan in 2018 can be seen in the table below.

Estimated Savings from Package Banking with a $350k home loan – Major Banks*
Stand-alone Package
Home Loan
Standard variable interest rate (avg) 5.23% 4.46%
Upfront Fee (avg) $600 $0
Annualised Ongoing Fee (avg) $87 $395
Estimated Monthly Repayment $2,093 $1,937
First Year Annual Cost $25,806 $23,645
Ongoing Annual Cost $25,206 $23,645
Credit Card
Annual Fee (avg) $342 $0*
Offset/Transaction Account
Annualised Account Keeping Fee (avg) $75 $0
Home & Contents Insurance
Annual Premium- 1st year (avg) $1,054 $935
Annual Premium – Ongoing (avg) $1,054 $964
Car Insurance
Annual Premium- 1st year (avg) $911 $853
Annual Premium – Ongoing (avg) $911 $865 Saving
Total First Year Cost $28,188 $25,433 $2,754
Total Yearly Ongoing Cost $27,588 $25,474 $2,114
 

Source: www.canstar.com.au. Underlying rates and fees current as of 19/12/2017. Based on standard variable home loans available for $350,000 with principal and interest repayments over 25 years.

* Home loan packages included the ANZ Breakfree Package, Commonwealth Bank Wealth Package, nab Choice Package and Westpac Premier Advantage Package. Credit cards included ANZ Reward Black, Commonwealth Bank Diamond Awards, nab Qantas Rewards Premium and Westpac Altitude Black. Home & contents premiums taken from Canstar’s Home & Contents Star Rating (September, 2017) based on a home and contents package for a building insured value of $450,000 and contents insured value of $50,000. Car insurance premiums taken from Canstar’s Car Insurance Star Rating (May, 2017) based on Comprehensive insurance for a 30-49 year old driver. *ANZ may charge a Rewards Program Services Fee of $55 per cardholder.

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Mr Watson also stressed consumers should not get complacent with their package home loans and to ensure they keep track of their discounts, especially the credit card annual fee.

“Generally the credit card will be free for as long as you keep the package unless it is a high-performing platinum card where you may need to pay for the rewards program,” Mr Watson said.

“If discounts within your package expire after a year, it is worth speaking with your institution to try to negotiate the best deal possible.”

Some of the benefits that can come with a package include:

  1. Credit card annual fee waived
  2. Monthly account keeping fee waived on an offset account or transaction account
  3. A premium discount on car insurance, home and contents insurance or landlord insurance
  4. Free or discounted financial planning sessions
  5. Term deposit bonus interest
  6. Personal loan rate discount and/or application fee waiver
  7. Discounted travel insurance
  8. Savings account bonus interest
  9. Discounted share trading (Bendigo Invest Direct4 – $17.95 brokerage for trades up to $22,000, 0.10% brokerage for trades over $22,000)

For help finding the right package home loan, consider our 5-Star rated products.

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