A one-package fee can be quite beneficial to a borrower who juggles a number of accounts and repayment deadlines, making their financial records more streamlined and succinct, whilst also cutting back on their interest and giving them bonus incentives. But the true benefit of a packaged loan can only be determined by breaking apart the entire whole and being able to decide which bits will actually be used.
When you notice yourself tallying-up figures into the calculator, only to see the plus sign working in full swing, a package might just alleviate some of the stress. It ultimately consolidates the breadth of your loans – credit cards, mortgage and transaction accounts – into one. The bank will then charge you a set annual fee for the bundle, with the promise to eliminate certain charges, provide you with rewards and incentives, and ultimately save you money.
Paying a set fee, starting from $300 a year, may save you thousands in the long run – if approached the right way. But what are these said perks? And when is it necessary to consider a package?
Packages will vary from lender to lender, so it’s advised to set up a meeting with your bank to scope out exactly what they offer as part of their package – including their annual fee, whether you are eligible based on the amount you need to loan, what fees they can waiver, and most importantly, the bottom line savings.
In broader terms, a package will ideally offer interest rate discounts on a range of variable and fixed home loans. A package would also eliminate maintenance fees across all accounts, remove the monthly operating cost on savings and transaction accounts, remove credit card fees (which can be up to $300 per year on their own), offer flexible repayments, and introduce discounts on other services the bank may provide, such as car, home and contents, and landlord insurance.
The bank can waiver the costs sometimes associated with setting up the loan or switching loans. There is also the option to link to an offset account, known to further reduce your interest rate. With interest rates currently sitting at a ground-breaking low, obtaining a package can result in an admirable home loan deal to be reached, and put a borrower in a prime position to make additional loan repayments – cutting back even more cost and shortening the lifespan of the loan.
Rather than taking out further credit, some lenders will also allow money to be redrawn from the loan, up to a certain amount per year.
When not to cave
Calculating how much money the package will save you includes being able to determine what services or products you won’t use. If you don’t require credit cards, and already have a low interest rate on your home loan, you may find that the annual fee is higher than what you’re already paying – therefore there’s no substantial benefit.
Make note of what parts of the package you will use, and then compare the bundled cost against how much you would be paying if you split it up into separate entities. You may have already found competitive rates with other lenders, or better insurance and credit card deals.
Some lenders also charge a valuation and settlement fee, both of which can cost over $100 each, and a discharge fee (if you choose to opt out of the package).
Although packaged loans sound admirable for every time there is a ‘$0’ against the word ‘fee’ or ‘cost’, it’s important to not let your eyes glaze over the phrasings. Be aware of the fine print, discuss options with your broker or solicitor, and make sure to break the package apart in order to reveal its true worth to you.