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Different ways to repay and access your home loan

Updated: Aug 4, 2021

Most lenders offer different ways to access and/or repay your home loan. Here are some of the more common features lenders offer to home loan customers.

Repaying Your Home Loan

Direct Debit Repayments

When you set up direct debit repayments you authorise your lender to automatically draw repayments from a chosen bank account. Apart from ensuring there is enough cash in the account, you do not have to remember to make repayments. Lenders normally allow payments to be made weekly, fortnightly or monthly.

Direct Salary Credits/Salary Deductions

Some lenders allow Direct Salary and Other Income Credits to repay a home loan. This feature allows you to have your salary (or other payments) credited directly into your home loan.

Accessing Your Home Loan

Debit Card

Some lenders offer home loans with a linked debit card.

To access home loans with linked debit cards you will need to have an offset account. The offset account can then be linked to your debit card, so you have the offset reducing the amount of interest payable on your home loan combined with the convenience of spending some money from that account when needed.

An offset account contains funds that substitute for part of the principal sum you have borrowed, and it can be accessed for drawdown without necessarily linking it with a debit card. It comes down to how you want to access the funds in your offset account and how quickly you want that access.

The advantage of an offset account is that the amount of interest you pay on your loan amount will be reduced, although you should always check the interest rate you are paying, and consider whether you are paying more for this feature than if you chose a ‘no-frills’ variable rate product.

Internet Banking

Internet banking allows you to view the details of your loan account online. Most lenders provide details of the loan balances, interest rates, repayments, term dates, statements, transaction history, redraw and mortgage offset information for your home loan account on their internet banking platform.

Telephone Banking

Similar to internet banking, telephone banking allows you to access the details of your loan account via the phone. Most lenders provide details of the loan balances, repayments, transaction history, redraw and mortgage offset balance information.

Exit Strategy

An exit strategy is the term used for the plan and methods you intend to use to be able to repay your loan at the point of retirement.

Exit strategies can vary from person to person and may depend on age, financial position, income level and plans for retirement.

If your owner-occupied property is the only asset used as security against the loan you will need to provide a written exit strategy to the lender. Remember, simply downsizing to a smaller home at the time of retirement may not be an acceptable exit strategy for most lenders.

If you are unable to provide an exit strategy, lenders may require the term of the proposed loan to not exceed your expected age of retirement.

An accepted retirement age can vary between lenders, but it typically sits between 65-75 years of age.

Common exit strategy plans can include:

  • Downsizing to a smaller house when you reach the age of retirement (not accepted by all lenders).

  • The sale of collected assets such as investment properties or shares.

  • Lump sum loan repayments from superannuation (not accepted by all lenders).

  • Ongoing income from your superannuation to fund your home loan repayments.

Speak to your mortgage broker today about different ways to repay and access your home loan. Kind Regards, The Newstead Group Team

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