Buying a home
Home loan features: How your home loan could work for you
24 February 2021
We asked Suncorp Lending Manager Cameron Selwood about some lesser-known home loan features you might find handy, including Home Loan Cashback, interest-only loans, substitute security and loan splitting.
What is Home Loan Cashback and is it the same thing as a redraw facility?
Cameron: : “Essentially, yes. It’s just called different things in different banks. Cashback is the ability to draw any advance payments you’ve made, i.e. anything that has been deposited to the loan over and above the minimum monthly payment, minus the next payment amount.
For example, if your payments are $1,000 per month, but you pay $2,500 each month, then in six months you would have accumulated $9,000 in extra payments. So, you would be able to ‘Cashback’ between $1,000 (minimum) and $8,000 (total minus one payment).”
Note that Cashback is only available on our Variable products, not the Fixed Loan, and application for Cashback is subject to conditions.1
What is an interest-only loan?
Cameron: “It’s just paying the interest due each month, but none of the principal. You can apply to go interest-only in your loan up to a total of five years (at which time it needs to be restructured).
It’s an option mostly for investment loans. There’s a misconception that every investment loan should be interest-only. Really, it’s something you should speak to your accountant to see if it could be beneficial to you.
Another option is Annual Interest in Advance loans. This is another sort of interest-only loan. Basically, you prepay the next financial year’s interest in advance in order to get some tax benefits. Again, this is something to speak to a financial advisor about.”
What is substitute security?
Cameron: “We can hold a loan (especially if it’s fixed and has a cost to payout) by removing one property and adding another.
We can put a Term Deposit against the loan temporarily until you find another house.
Customers need to apply for this, and have it approved, as we need to ensure that any changes to the contract still show you can afford the loan going forward. This isn’t a way of keeping a loan without income. You would still need to show that you can afford the loan.”
What is loan splitting?
Cameron: “Under Suncorp’s packaged home loan, you can split the loan to be partially fixed and partially variable.
The Fixed Rate Loan isn’t as flexible as the Variable Rate. It doesn’t allow for cashback, add loans, offset, or anything more than $500 per month over your normal repayments without penalty. Because of all that, you may not wish to fix the whole loan. But the Fixed Rate is often lower than the Variable. That could give you peace of mind if the rates go up, as you can hold onto your lower rate.
Variable loans have the offset, Cashback, and a lot more flexibility, but there is always a risk of rates increasing.
Splitting the loan is sort of hedging your bets. Some of it’s fixed and some of it’s variable, to get the best of both worlds. It may not cost any extra to split your loans under Suncorp’s packaged home loan, but conditions apply.”
Talk to a lending expert about your financing questions
It’s a great idea to brush up on all the features different home loans offer. A Suncorp Bank home lending specialist can help answer your questions, and all consultations are 100% obligation-free.
Cameron Selwood is Lending Manager at Suncorp Bank's Carindale, Queensland store. He has more than 17 years of home lending experience and he's passionate about helping customers achieve their home ownership dreams.
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1You need to apply for Cashback, which may be available subject to conditions specified in the contract. Please read these conditions carefully. Available Cashback may exclude any recent cheque, direct debit or pay at post payments and external transfers cannot be performed using online Cashback. Fixed Rate home loans are excluded from Cashback.
Eligibility criteria will apply to all home loan features mentioned in this article. Not all of the features suggested in this article will be available to all customers. Information is intended to be of a general nature only and any advice has been prepared without taking into account any person's particular objectives, financial situation or needs.
Home Loans are provided by Suncorp-Metway Ltd ABN 66 010 831 722 AFSL No. 229882 Australian Credit Licence 229882 (“Suncorp Bank”) to approved applicants only. Fees, charges, terms and conditions apply and are available on request. Insurance is issued by AAI Limited ABN 48 005 297 807 trading as Suncorp Insurance. Information provided is general advice only and has been prepared without taking into account any person's particular objectives, financial situation or needs. You should make your own enquiries, consider whether advice is appropriate for you and read the relevant Product Disclosure Statement or Product Information Document before making any decisions about whether to acquire a product.