Wednesday, January 16, 2019


Loans are not 'one size fits all.' Different loan types suit different age groups, different living situations and different attitudes to money. 

A common trap that home-owners fall into is 'set and forget.' They do the research, shopped around, found the right option and then they are reluctant to revisit the process, even if their personal circumstances have dramatically changed. 

Before you start shopping around for a new loan or an upgrade to your old loan, it is worth knowing a little bit about the options available. The three most common differentiators are variable rates, fixed rates and combo rate loans:

1. Variable rate loan

A variable rate loan offers greater flexibility than a fixed rate loan and will appeal if you don't want an interest rate to be locked in for a set term. Often with variable rate loans, you can also redraw or make additional payments electronically at no cost, so you can pay off your home loan sooner and get ahead. 

2. Fixed rate loan

A fixed rate loan is right for you if you need greater peace of mind, as you will have the certainty of knowing what your repayments are during the fixed term rate. You can choose different terms - often between 1 to 5 years, depending on what suits you. 

3. Combo rate loan

Another option is purchasing a white-label loan. They are becoming increasingly popular! A white-label loan is essentially a home-branded loan, much like home-branded products you see in the supermarket. Like these products, a white-label loan aims to delivery many of the same great features as bank-branded home loans, but for a lower cost. 

You can access different types of white-label loans, whether variable, fixed or combo. White-label loans are known for their high quality, low-cost and flexibility. They are particularly suited for home-buyers looking for a simple, straightforward product. They can give access to the loan-features you need, like redraw, debit card access and customer care facility, and you don't have to pay for the bells and whistles you won't use.

If you are not sure which of these options sounds right for you, mortgage brokers can provide real value to customers who need a helping hand to make this important decision. Because mortgage brokers have access to lots of loans from a range of different lenders, you will receive independent, unbiased advice based on their expertise and experience in the industry.


With the redraw facility is one of the less glamorous home loan features, it does deserve a second look, and here is why... 

The redraw facility explained

A redraw facility lets you make additional repayments to reduce your variable rate home loan balance and save on interest. If you pay more than your minimum scheduled repayments, then you will have money available to redraw from your home loan. 

The redraw facility is a common feature of many home loans, but is not available on construction loans and only some lenders allow it for fixed rate loans. 

You can redraw funds when they are required, or you can keep the funds in your home loan to pay off your principal faster. The amount available for redraw is the difference between what you have paid and how much you were required to pay, less one month's scheduled repayment. 

Accessing redraw 

You can check your loan account online to view your available redraw amount at any time. Alternatively, you can call your home loan customer care team and ask them to check for you. 

You can withdraw your funds from certain ATMs depending on your lending provider, but this may attract certain fees and come with restrictions on minimum amounts. 

What happens after using redraw?

After you redraw money from your home loan you will continue to make your regular repayments as normal. Be aware of the interest component of the repayments you make will increase since you are now paying interest on a higher loan principal amount. 

What are the benefits?

Like an offset account, a redraw facility can help reduce the total interest paid on your loan and shorten the life of the loan. And of course, when you need some cash it is easily accessible. 

Depending on your lender, additional payments can be made at no extra cost and redraw funds can be accessed at any time. When comparing loans and choosing the option that best suits your financial needs, remember to consider the redraw facility. 


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Contact Details

Zippy Finance 

PO Box 3078
North Turramurra
NSW 2074

T 1300 855 022 

Louisa Sanghera is a credit representative (437236) of BLSSA Pty Ltd ACN 117 651 760.  Australian Credit Licence 391237. ABN 85 168 278 975.

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