If you just have a home loan it is a ‘product’ that the bank offers, just like a transaction account or credit card.
When you have a home loan a bank will also commonly want to offer you a package that includes 2 or more products.
Generally speaking they all charge you a fee to have a package. Normally they charge around $350-$400 per year…. But still, there can be some good savings made on bigger loan amounts in having a package. – Just make sure you compare your options before jumping in – ie talk to a home loan guy about it 🙂
What do you get?
- Low or no home loan application fees
- No monthly fees
- Free offset account (saving between $9 & $15 per month saving)
- Free credit card (mostly they offer a Gold or Platinum credit card and saves $100 – $150 per year)
- Discounts on their standard variable rate loans (the bigger the loan the more discount)
- Sometimes discounts on their standard fixed rates
- Sometimes they offer ’discounts’ on insurance products or investment products
Granted you do not need a platinum credit card, but they are trying to put value into the package.
I say ‘discounts’ because you need to make sure you compare this insurance (eg home contents & building insurance) against main stream competitors to see if it is a real discount.
Why do they do it?
Most Lenders will want to ‘sell’ you a Home Loan Package as it is the way they can deliver you their best interest rates – but there is a ‘catch’… if you have 3 or more accounts/products with the one bank the reality is you are less likely to change banks. This is what they are looking for, they are building ‘loyalty’ buy making it harder for you to leave.
And believe me it works. A lot of people stay where they are because it is easier even if they know they will be better off somewhere else.
A Warning… or two
- Just because a certain bank promotes their product as being the best or being something wonderful. Make sure you compare, don’t just believe them.
- For example one bank may sell you say a 0.7% discount off their standard variable rate and tell you how wonderful this is and how much you will save over the life of your loan.
- But if someone else has a bigger discount or has a lower standard variable then you are losing out
- You may not actually benefit from having a package if there is a better deal at another bank
- There can be some good benefits in signing up for a package
- Be aware of the annual fees
- Make sure you actually need all the stuff they are selling you
- Make sure you talk to a home loan guy and compare your options
- Make educated decisions, don’t just go for the easy option