The Pros and Cons of Common Home Loan Features

Most lenders offer similar interest rates but differ significantly in loan features. For ADF members who relocate regularly, features like portability and offset accounts matter more than a 0.05% rate difference because they determine whether your loan adapts to your circumstances or forces you to refinance every posting.

Offset Accounts: How They Work and When They're Worth It

An offset account is a transaction account linked to your home loan where the balance reduces the interest you're charged. If you have a loan amount of $400,000 and $30,000 sitting in your offset, you only pay interest on $370,000.

Consider an ADF member posted from Puckapunyal to RAAF Base Williams who rents out their Victorian property. Rental income flows into the offset account each month, reducing interest charges on the owner occupied home loan without reducing the loan balance itself. That distinction matters because it preserves tax deductions if the property later becomes an investment, and it maintains access to those funds if posting costs or emergency expenses arise. The member keeps full access to the offset balance while cutting thousands in interest charges each year, depending on the amount held in the account.

The downside is that offset accounts typically come with higher ongoing fees and slightly higher interest rates compared to basic variable products. If you're unlikely to hold significant savings or don't have regular income flowing in, the additional cost outweighs the benefit.

Redraw Facilities: Flexibility With Conditions

A redraw facility lets you access extra repayments you've made on your loan above the minimum required. It's a common feature on variable rate loans and some fixed products, though conditions vary.

The appeal is that you can make additional payments when cash flow allows, then withdraw those funds later without refinancing. In practice, some lenders impose minimum redraw amounts, processing delays, or restrict redraws during fixed rate periods. If you're posted interstate and need quick access to funds for relocation costs, a redraw facility with a three-day processing time and a $500 minimum may not suit your needs as well as an offset account with instant access.

Redraw facilities generally don't attract the same fees as offset accounts, making them a lower-cost option if you want some flexibility without the ongoing account charges. The trade-off is reduced accessibility and less certainty about withdrawal conditions, particularly if lender policies change.

Split Loans: Dividing Your Loan Between Fixed and Variable

A split loan divides your total borrowing between a fixed interest rate portion and a variable interest rate portion. You might fix 60% of your loan to lock in repayments and leave 40% variable to retain access to features like offset and redraw.

This structure suits ADF members who want repayment certainty for core expenses but need flexibility for changing circumstances. In a scenario where you're unsure whether your next posting will require you to rent out your property or sell, splitting the loan reduces exposure to break costs on the fixed portion while keeping enough variable debt to benefit from an offset account or make lump sum repayments without penalty.

The complexity increases because you're managing two loan accounts with different terms, rates, and features. Some lenders charge separate fees for each split, and the administrative burden rises if you need to adjust the split later. If you're comparing rates and features across multiple lenders, verify whether split loans incur double the ongoing fees before committing.

Portability: Keeping Your Loan When You Move

Portability allows you to transfer your existing home loan to a new property without refinancing. For ADF members who relocate frequently or upgrade within a few years, this feature avoids discharge fees, application costs, and the time required to apply for a new loan.

Not all lenders offer true portability. Some require you to reapply and meet current lending criteria, while others allow a seamless transfer as long as the new property meets their security requirements. If you're posted and decide to sell in Victoria and buy in Queensland, a portable loan means you retain your current interest rate, loan structure, and any negotiated rate discounts without starting from scratch.

The limitation is that portability typically only works if you're upsizing or borrowing a similar amount. If you're downsizing significantly, most lenders will require a partial discharge and reassessment. It also assumes your current loan suits your needs, which may not hold if your financial situation or goals have shifted since you first borrowed. If you're considering whether your current loan is still the right fit, a loan health check can clarify whether portability or refinancing makes more sense.

Interest-Only Repayments: Short-Term Cash Flow or Long-Term Cost

Interest-only loans let you pay only the interest component for a set period, typically up to five years, without reducing the principal. Monthly repayments drop substantially, which can help if you're managing relocation costs, holding a property temporarily, or building cash reserves.

The cost is that you don't build equity during the interest-only period, and total interest paid over the life of the loan increases because the principal remains unchanged. This option works for investors or ADF members holding a property short-term while posted, but it's rarely suitable for owner-occupied loans unless there's a specific cash flow need. You can read more about when this structure makes sense in our guide to interest-only loans for ADF members.

Once the interest-only period ends, repayments revert to principal and interest, often with a sharp increase that catches borrowers unprepared. If you're using interest-only to manage short-term cash flow, plan for the reversion before it happens.

Rate Discounts and Package Deals: What You're Actually Getting

Many lenders offer package home loan products that bundle a rate discount with fee waivers, offset accounts, and credit cards. The advertised discount might be 0.70% off the standard variable rate, but package fees can reach $395 annually.

Calculate the net benefit by comparing the interest saved from the discount against the package fee. On a smaller loan amount, the fee can exceed the discount. On larger loans, the package typically delivers value, particularly if you're using the offset and other included features. Some lenders waive package fees for ADF members or offer additional rate discounts, so it's worth confirming what's available before assuming the advertised rate is your final rate. For help understanding how to apply for a home loan with features that suit your circumstances, speak to someone who works with ADF-specific lending regularly.

Packages often lock you into using the lender's transaction accounts and credit cards, which may not suit your banking preferences. If you prefer to bank elsewhere, a lower-rate loan without a package may be more practical.

Making Feature Choices That Match Your Posting Cycle

Loan features should align with how you'll use the property and how often you're likely to move. If you're posted every two to three years, portability and offset accounts deliver more value than a marginal rate saving. If you're settled in one location and focused on paying down the loan quickly, a basic variable loan with unlimited additional repayments and no offset fees may suit you.

ADF members also have access to no LMI loans, which can increase borrowing capacity and reduce upfront costs, but the benefit only applies if the loan structure and features support your longer-term plans. Features that add cost without delivering flexibility or functionality just increase what you're paying for no return.

Call one of our team or book an appointment at a time that works for you to discuss which loan features match your situation and whether your current loan structure still fits your goals.

Frequently Asked Questions