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Loan Features Comparison: Which Extras Matter

Home loans come with various features and options. Some are valuable; others are marketing fluff. Here’s what matters.

Core features worth evaluating:

Offset account: money in an offset account reduces your interest calculation. This is valuable if you have savings you want to use to reduce interest but keep accessible. Worth having.

Redraw facility: lets you borrow back any extra payments you’ve made. Useful for emergencies and building flexibility. Worth having.

Rate lock (or break fee lock): some lenders let you lock a rate for 30–60 days while you shop. Valuable if rates are moving fast.

Split loans: divide your mortgage into multiple accounts (e.g., 50% fixed, 50% variable). Useful for risk management. Valuable if you’re uncertain about rate direction.

Flexible repayment: ability to change repayment frequency (monthly to fortnightly, for example). Helps you align repayments with your pay cycle. Valuable.

Extra payment options: ability to make lump-sum payments without penalty. Important for gig workers or those with variable income. Valuable.

Features with less value:

Loan protection insurance: covers your repayments if you lose your job or become unable to work. Sounds good but is expensive and has many exclusions. Not worth the cost unless you’re in a risky job.

Payment holiday: ability to skip one month’s payment per year. Sounds attractive but you’re usually paying interest on that skipped amount. Not really a benefit.

Annual reset: some loans reset their term each year (e.g., 30-year loan becomes a 30-year loan again). This is a lender benefit, not yours. Avoid.

Loyalty bonuses: some lenders offer rate reductions if you stay with them for years. This sounds good but is rarely better than shopping around every few years.

Which features matter most?

For most borrowers: offset account + redraw + flexible repayment + extra payment option. These four are practical, useful, and don’t cost extra.

For uncertain rate outlook: split loans to hedge your bet (part fixed, part variable).

For variable income (gig workers, self-employed): flexible repayment + extra payment options so you can pay more when income is high.

For investors: loans designed for investment property with features like interest-only options and portfolio management.

How to evaluate loans:

When comparing two loans, don’t just look at interest rate. Look at:

  1. Interest rate (most important)
  2. Comparison rate (includes most fees, gives true cost picture)
  3. Features offered (offset, redraw, flexibility)
  4. Break fees or exit costs
  5. Monthly fees or ongoing costs
  6. Customer service (read reviews; a lower rate with poor service isn’t a deal)

Example comparison:

Loan A:

  • Rate: 4.50%
  • Comparison rate: 4.58% (includes fees)
  • Features: offset, redraw
  • Monthly fee: $0
  • Break fee (if applicable): standard

Loan B:

  • Rate: 4.45%
  • Comparison rate: 4.62% (includes higher fees)
  • Features: offset, redraw, rate lock, split loans
  • Monthly fee: $10/month
  • Break fee: capped at 0.5% of loan

Loan A is cheaper on headline rate. Loan B looks similar on comparison rate but has more features and a break fee cap. Which is better depends on your priorities.

The takeaway:

Don’t get distracted by flashy features you won’t use. Focus on rate, basic features (offset + redraw), and flexibility. Most borrowers never use loan protection insurance, payment holidays, or loyalty bonuses. Invest in features that matter to your situation.

Talk to your broker about which features align with your needs, then compare apples to apples.