Thinking of linking
A home loan doesn’t have to be just a home loan. It could pay to link your mortgage with several other banking products, reports
Dion Crowe says linking your home loan to your existing banking products can have significant benefits. ‘‘One of the easiest and most effective ways to reduce the amount of interest you pay on your home loan is to link it with an interest offset account,’’ he says.
‘‘This is where you link your loan with an eligible transaction account, with any funds in that account offsetting the unpaid balance of your loan account upon which interest is payable. For example, if you have a $250,000 home loan with $5000 in your offset account, you will only pay interest on $245,000.’’
Mr Crowe says using your credit card wisely can also help to reduce interest if you have an offset account.
‘‘If you have a credit card, consider using it for all your monthly purchases and leaving the funds in your offset account until your credit card payment is due,’’ he says.
‘‘In doing so, you will be using that money to help reduce the interest payable on your home loan for the length of time it remains in your account.
‘‘Keep in mind that you will need to ensure your spending doesn’t exceed your income and that you pay your credit card in full by the due date if you want to avoid paying interest on your credit card.’’
BankSA general manager Chris Ward agrees there are substantial financial advantages in packaging up financial products, including a home loan, credit card and transaction account with the one bank.
By bundling up the home loan, credit card and transaction account into an all-in-one package, customers will be able to obtain a discount on their home loan rate of as much as 0.7 per cent.
The customer pays one annual fee for the package but in return receives financial benefits, including the discount on the home loan rate, no annual fees on credit cards and no account keeping fees on transaction accounts.
Mr Ward says banks are essentially rewarding their customers for showing loyalty in all areas of banking and financial services.