Module 2 – Lesson 5 – Professional vs Basic Home Loans – What is the difference? (4 Min)

So with all the loan types in the market, what is the difference between them? We deep dive into the key differences in this lesson.

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Prefer reading? Here is a transcript of the video:

Ryan here, and today we’re going to talk about the difference between basic loans and professional loans. By the end of this, you understand the differences between the two and see which one suits you.

So a basic loan, what is it so a basic loan? Typically, only has a redraw facility attached to the variable rate loan. As I said, it typically is only a variable rate loan. Some lenders do offer basic fixed rates. However, most lenders, if you go on a basic loan, it is just going to be a variable rate loan. Typically allows uncapped extra payments again if it’s a variable rate loan, so there’s no cap on extra repayments. Low or nil in ongoing fees, which is good, especially for, you know, the rate savvy people, which I guess everyone is. Commonly lower rates compared to a package loan which we’ll go through in a second.

So professional loan, what is it a professional loan? Typically has an offset account attached to a variable rate loan. Most lenders do not allow offset accounts attached to a fixed-rate loan, and you’ll know the difference between redraw and offset via a previous lesson that you would have completed. Credit card and insurance discounts when you go on professional loan lenders do give you a credit card and insurance discounts. So, home and contents landlords insurance. These professional loans do come with annual package fees anywhere between $180 all the way up to $400 depending on the lender. Professional loans, commonly lower fixed rates but slightly higher variable rates, so if you were to go on a fixed-rate loan, typically speaking, you will have to go on a professional rate loan.

Now if you go with a professional loan, you can split your loan. What that means is if you want to go on a variable and a fixed rate. I mean, have the peace of mind that comes with a a fixed rate and the flexibility of the variable rate a professional loan does allow you to do. It allows uncapped extra repayments on a variable rate loan. So, there are no caps on extra repayments like the basic loan you can repay extra onto the variable-rate portion. As I said before, there are always caps on extra repayments. Well, I shouldn’t say always most lenders have caps on how much you can extra into your fixed-rate loan.

What is the difference? Professional loans include all the features of a basic loan with additional features, i.e., offset accounts, fixed-rate discounts, insurance discounts, etc. Now it really depends if you want to go fixed or variable and again you’ll need to get some advice on you know which one better suits you. Basic loans do have low or nil ongoing fees as opposed to professional loans, which have annual fees, so if you’re just looking for the best rate in town with low ongoing fees, you’re probably going to lean towards a basic loan. However, again you need to get some advice on that. Thanks for tuning in to our lesson on the difference between basic and professional loans.

I’ll see you in the next lesson!

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