What can I do to customise my loan?

Home loans may seem like they come standard to all, but some lenders do allow more flexibility, so borrowers can change certain aspects of their mortgage to suit them.

At loans.com.au, we offer our borrowers a few ways to modify their home loans so they can better match their situation. Here are some options borrowers could consider when tailoring their mortgage to their needs:

Choose a split loan

Deciding between a variable or fixed rate home loan is a tough decision for many borrowers. For those looking to get the benefits of both types of home loan interest options, a split loan may be worth considering.

A split loan lets borrowers divide their home loan balance so one portion is charged at a fixed rate and the other is charged at a variable rate. The home loan split doesn't have to be a perfect 50/50. The loan balance can be split in various ways, so it could be 50/50, 60/40, 90/10, or whatever suits the borrower's needs best, pending the lender's approval.

Split loans come with a range of benefits. Borrowers can choose to split their loan so they can have the advantage of fixed monthly repayments through a fixed rate, cash-flow certainty, and access to an offset sub-account and a decreased interest rate if rates drop, through a variable rate. However, split loans may have higher break costs, reduced flexibility, and restrictions on certain loan features.

Change repayment frequencies

Home loans from loans.com.au offer borrowers flexibility with their repayments. Borrowers with principal and interest repayments can choose from a monthly, fortnightly, or weekly repayment frequency scheme. Customers with interest only repayments will only be able to make payments monthly.

Changing the repayment scheme to fortnightly or weekly could lower the interest paid over the life of the loan and may make it easier for borrowers to manage their repayments.

For instance, a borrower takes out a $500,000 home loan with a 30-year term and a variable interest rate of 5.79% p.a. If they choose a monthly repayment scheme, their repayments will be $2,931 a month, and the interest paid overall would be $555,010.

In comparison, a similar home loan but with an accelerated fortnightly repayment scheme would have a repayment amount of $1,465 per fortnight, and the interest paid over the life of the loan would be $439,774. That's a potential savings of $115,236.

When choosing a repayment frequency, it's best to think about personal finances and weekly or monthly budgets. Having more frequent repayments could mean paying less interest overall; however, it could be more difficult to manage finances. It's best to weigh the pros and cons carefully before making a final decision.

Add an offset sub-account

Other ways to customise a home loan are by utilising useful loan features such as an offset sub-account. An offset sub-account is a facility linked to a borrower's home loan account that lets them withdraw and deposit funds. The money deposited in the offset sub-account is effectively deducted from the current loan amount for interest calculation purposes, which reduces the interest calculated.

With an offset sub-account, borrowers could pay less interest, pay off their home loan faster, and could help them make the most out of their savings, as they will be used to offset the balance of their home loan. However, these benefits often come at the cost of higher interest rates and increased ongoing fees.

To learn more about how offset sub-accounts work, get in touch with loans.com.au and check out our fully featured variable rate home loans with an offset sub-account available.

Make extra loan repayments

If changing the structure of a home loan seems too complicated, there are simpler ways to customise a home loan. Making extra or additional repayments could go a long way in terms of saving on interest costs. Use our online extra and lump sum payment calculator to see how much extra repayments could change a home loan's interest in the long term.

Some lenders may not allow free additional repayments, or offer limited additional repayments and would charge fees for any extra payments made. At loans.com.au, we offer free unlimited extra repayments for most of our variable home loan products.

Are there other ways to customise a home loan?

Lenders may offer more ways to customise a home loan that's tailored to the needs of the borrower. For those who are looking for more mortgage customisation options, it's best to speak with the lender directly to see what they can provide.

When you take out a home loan with loans.com.au, our team of lending specialists will work with you to find a mortgage with terms and features that align with your needs. Call 13 10 90 today or apply online to get started.

Disclaimer: The information provided in this article is general in nature and does not constitute financial or legal advice. Please seek independent professional advice tailored to your personal circumstances before making any financial decisions.