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What are home loan packages and are they worth it?

If you’ve been searching for a home loan, chances are you’ve come across home loan packages, also known as package home loans. Home loan packages can be alluring for borrowers because they often seem more convenient and even cheaper than regular home loans.

It’s important to get the full picture when it comes to home loan packages. In this article, we’ll explain what a home loan package includes and the various benefits and drawbacks, so you can decide if getting a packaged home loan is right for you.

What is a home loan package?

A home loan package is a home loan bundled with various other financial products at a discounted interest rate or with fewer fees for each product. So, you end up with a ‘package’ of products alongside your home loan, all with the same lender.

A home loan package can include financial products like:

  • Credit cards
  • Offset accounts
  • Bank accounts, both transaction and saving
  • Insurance policies
  • Share trading
  • Financial planning
  • Insurance policies like home and contents insurance, car insurance and health insurance.

Home loan packages are usually only available on principal and interest loans but both owner occupiers and investors will find package loans available to them. You’ll also be able to find home loan packages for both variable interest rate and fixed interest rate loans.

How much do home loan packages cost?

If you take out a package home loan, you’ll be charged an ongoing annual fee, rather than multiple fees for each individual product included in the package. This fee is usually around $400 per year but can be as high as $700. By comparison, standalone home loans don’t usually attract an annual fee.

However, you may also receive a discounted interest rate on your home loan. This means you may pay an interest rate which is lower than what borrowers on a standalone home loan with the same lender pay.

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What are the benefits of a home loan package?

  • Convenience: package home loans allow you to keep your home loan, banking products and credit card (as well as other financial products like insurance) all with one lender
  • Saving money on products: while this isn’t guaranteed, lenders will often discount products like insurance or even your home loan interest rate as part of a home loan package. This means you could potentially be paying less for these products than if you had bought them separately
  • Paying less in fees: package home loans charge one annual fee, eliminating individual fees for each product in the package. This means you could pay less in fees overall.

What are the drawbacks of a home loan package?

  • You may not have the best rates available: although lenders often discount interest rates and other products as part of a package deal, it’s possible there are more competitive interest rates available on standalone home loans and credit cards, for example
  • You could end up with products you don’t use: it’s possible to get drawn in by discounted rates and end up with credit cards or insurance products that you won’t use
  • They can discourage you from refinancing: if you have all of your lending and banking products with the one lender, refinancing for a better rate or more suitable product may seem headache-inducing, so you might be less likely to switch
  • You might end up paying more in fees: although it’s possible to save in fees with a home loan package, the annual package fee may cause you to pay more in the long term than borrowers with a lower fee on a standalone mortgage.

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Are home loan packages worth it?

This totally depends on your personal needs and wants, but there are a few things you should consider when making a decision about whether or not a package home loan will suit you.

For a start, weigh up the pros and cons of home loan packages outlined above. Maybe you don’t mind paying a bit extra in fees for the convenience of having most, if not all of your financial products in the one place. Or, maybe you’d prefer to only take out products that you’ll definitely use, making a standalone home loan without extra products attached the best option for you.

Also, you’ll need to review the fees and charges associated with a home loan package closely to see if the annual package fee will outweigh the savings from having a discounted interest rate on your home loan or waived fees on products like bank accounts.

It’s important to pay attention to comparison rates when you’re looking at package home loans. While the idea of a discounted interest rate on your home loan might be enticing, the comparison rate – which estimates the total costs you’ll pay on your loan on top of the principal, plus other fees and charges – could tell a different story. Make sure you compare home loan package comparison rates to standalone home loan comparison rates to see if you really are getting a better deal.

If you do take out a package home loan, it’s still a good idea to keep observing interest rate trends and current home loan deals on offer by other lenders. This way, you can ensure your deal is still competitive, and if it’s not, you can consider refinancing so that you don’t overpay. While it may seem too difficult when all of your finances are with one lender, refinancing to get yourself a better deal doesn’t have to be a stressful task.

Are you thinking about getting a home loan package? Our friendly Home Loan Specialists are here to help you weigh up your options at a time that suits you – just book an appointment.

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The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.

Tags: home loan, refinance, fixed interest, interest rate, variable interest, home insurance, offset account, package home loans, ongoing fees, new purchase

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# Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
Lendi is a privately owned and operated Australian business. Our mission is to change the way Australians get home loans by providing a faster, smarter and more secure home loan experience designed around the customer’s convenience and needs. Although Lendi compares over 1600 products (2,500+ products including feature and pricing variations) from more than 35 lenders, we don't cover the whole market or compare all features and there may be other features or options available to you. While Lendi is 35% owned by founders and employees, we have also been supported by some great minority shareholders including Bailador, Macquarie Bank Ltd and a number of Australian sophisticated investors.
*WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. The comparison rates are based on a loan amount of $150,000 over a loan term of 25 years. Fees and charges apply. All applications are subject to assessment and lender approval. Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
IMPORTANT INFORMATION: Loan terms of between 1 Year and 40 Years are available subject to lender and credit criteria. Maximum comparison rate will not exceed 14.99% (see comparison rate warning above). Any calculations or estimated savings do not constitute an offer of credit or a credit quote and are only an estimate of what you may be able to achieve based on the accuracy of the information provided. It doesn't take into account any product features or any applicable fees. Our lending criteria and the basis upon which we assess what you can afford may change at any time without notice. Savings shown are based on user inputted data and a loan term of 30 years. All applications for credit are subject to lender credit approval criteria.
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