Hidden home loan costs: The sneaky fees you need to know about

Aussies are potentially throwing away thousands of dollars on confusing home loan “extras” they don’t even understand, new research reveals.

Money.com.au’s latest study found that a staggering one in three Australian homeowners (34 per cent) believe their home loan features, such as offset accounts and bundled credit cards, are either too complicated or simply not worth the fees.

Despite this, a massive 62 per cent of borrowers have opted for package home loans loaded with these “extras,” often lured in by the promise of a discounted interest rate.

But are these perks really worth the cost?

Mortgage Expert Debbie Hays from Money.com.au says savvy borrowers are increasingly ditching package deals to avoid being stung by unnecessary fees.

“We’re seeing many borrowers realise they’re not using their offset accounts enough to justify the monthly or annual fees,” she explains.

“Others simply don’t have enough savings in those accounts to actually benefit from the offset.”

The real cost of “extras”

So, how much could these “extras” be draining from your bank account?

Imagine you have a $600,000 loan over 30 years and $10,000 sitting in your offset account. At a 5.50 per cent interest rate, you’d save around $6,790 in interest over five years. Sounds good, right?

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Aussies are potentially throwing away thousands of dollars on confusing home loan “extras, experts warn.

But if that offset account is bundled into a package loan with a $395 annual fee, those fees quickly add up to $1,975 over five years, reducing your actual savings to a measly $4,815.

The alternative? Putting that same $10,000 into a redraw facility on a basic, no-frills home loan would give you the full $6,790 in interest savings, as long as you maintain your regular repayments and resist the urge to spend the money.

Young Aussies most confused – and potentially losing the most

The research also revealed that younger borrowers are the most likely to be baffled by these home loan “extras.”

A worrying 35 per cent of Millennials admitted they either didn’t understand what they were paying for or didn’t believe the features were worth the cost.

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Mortgage holders are urged to look at their extras as they could be wasting hundreds of dollars.

Baby Boomers weren’t far behind at 34 per cent, followed by Gen Z (33 per cent) and Gen X (32 per cent).

Ms Hays urges homeowners to carefully scrutinise their home loan and its associated fees.

“If your home loan includes an offset account, make sure the interest rate is competitive and that the fees aren’t eating into your potential savings,” she advises.

The post Hidden home loan costs: The sneaky fees you need to know about appeared first on realestate.com.au.