What is a home loan package?
A home loan package bundles your home loan together with a set of other banking products under a single annual fee. The feature most borrowers notice first is the discounted interest rate — at the time of writing, packaged variable-rate loans were generally carrying a reduction in the order of 0.8% to 1.4% off the standard variable rate, though that margin moves with the market and differs by lender.
The package is a pricing structure as much as a product. A lender offers the discount to win the whole of your banking relationship, not just the mortgage. The question worth asking is not "is a package cheaper" in the abstract, but whether the bundle as a whole fits the way you actually bank and the loan size you actually need.
The products commonly bundled into a package include:
- A reduced interest rate on the home loan
- An offset account
- Redraw on the home loan
- An optional credit card, often with the annual fee waived
- Transaction or savings accounts, usually with fees waived or reduced
- A waived or discounted loan application fee
- A free or discounted property valuation
- Discounts on home and contents, car and landlord insurance
- Discounts on risk products such as life, trauma, TPD and income protection cover
- A discount on financial planning services
The annual fee and what it buys
A package typically carries an annual fee in the order of $400. For most borrowers the rate discount more than covers that fee, and on a reasonable loan balance the saving on interest in the early years of the loan can run into the thousands. That is the headline maths, and on a standard owner-occupier loan it usually holds.
It does not hold automatically. The fee is fixed; the value of the discount scales with your loan size. On a small balance the rate reduction may not clear the annual fee, which is why packages generally carry a minimum loan amount — as a guide, around $150,000 — below which the structure stops making sense.
Read the whole bundle, not the headline
The trap in a package is judging it on the rate discount alone. The bundled insurances and the financial planning discount are presented as savings, but a "discount" only saves you money against a price you would otherwise have paid. To work out whether a package genuinely saves you money — and how much — you have to price the components against what you would pay buying them separately.
General insurance and risk insurance are the clearest examples. A landlord or life insurance "discount" inside a package is worth nothing if the cover does not match what you need, or if a comparable policy elsewhere is cheaper at full price. Shop those products on their own merits across different institutions and compare like for like, rather than treating the package discount as a reason to take cover you would not otherwise choose.
The same logic applies to the offset account, the credit card and the transaction accounts. They add value only to the extent you would use them. A package built around features you never touch is just an annual fee with a rate discount attached — which may still be worth it, but only once you have done that sum honestly.
Whether a package is the right structure depends on your loan size, how you bank, and how the discounted rate compares against a basic loan with no package fee. That comparison is worth running properly before you commit. Book a strategy session and we will work through which structure actually fits your position.
General information only — not personal financial product or credit advice. Lending is subject to each lender's policy, your full circumstances and responsible-lending assessment. Insurance and financial planning products are matters for your licensed adviser. AeFin is an Australian Credit Representative (CR 464548) of Finsure (ACL 384704).