Basic home loans

While an offset account is a fantastic feature, some borrowers just need a basic home loan with a low rate and minimal features.

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Richard Whitten

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Key takeaways

  • A basic home loan is often a lender's simple, no frills product with a competitive interest rate and no offset account.
  • For many borrowers, an offset account is one of the best features on a home loan.
  • But some people just want the lowest rate possible and don't care about anything else. And sometimes that makes perfect sense.

What is a basic home loan?

A basic home loan is usually a low rate, low fee home loan that doesn't have an offset account. That's basically it.

Most basic home loans have variable interest rates, but plenty of lenders offer basic fixed rate loans too.

A basic home loan is often a popular choice for a new borrower who just wants a simple product with a low interest rate.

The opposite of a premium, package or full-featured home loan

The presence of a 100% offset account is the key difference between a basic home loan and the alternatives.

Some lenders only offer this feature on loans they might consider "premium" or full featured. Other lenders only include an offset account on package home loans, which combine a home loan with a bank account (offset) and maybe a credit card.

No offset? A redraw facility is the next best thing

While basic home loans rarely come with offset accounts, almost every basic home loan with a variable rate gives you two linked features that are pretty close.

The ability to make extra repayments on your loan and the option to redraw them to spend if you needed. A redraw facility is not quite as useful or flexible as an offset account, but it's close enough for many borrowers.

Which lenders offer basic home loans?

Many Australian lenders have basic home loans. Some basic home loans from Australian lenders include:

  • St.George Basic Home Loan. This loan is what St.George calls a "no-frills" home loan with no offset account and no ongoing fees. It does offer a redraw facility.
  • Macquarie Basic Home Loan. Macquarie's Basic Home Loan is quite similar to its Offset Home Loan. The main difference is the lack of an offset, and the Offset Home Loan has higher fees.
  • ME Basic Home Loan. This loan has a competitive variable interest rate and lets you redraw extra repayments.

What's in a name?

Confusingly, some lenders use different terms for their "basic" home loans. AMP offers a basic package home loan, which comes with an optional offset account. The AMP Essential Home Loan is AMP's basic, no offset loan product.

Suncorp's Back to Basics Home Loan, or "Back to Basics Home Loan - Better Together Special Offer" is a low rate, basic home loan.

Basic home loan stats
Basic home loans are quite common in Australia. A quick analysis of Finder's home loan database shows there are over 650 interest rates with "basic" in the product name. This includes options for investors and home buyers. The majority of these loans don't come with an offset account, but a small number do give you the option of adding one, often for a small fee.
Source: Finder's home loan database

Who is a basic home loan suitable for?

Every borrower needs to assess their own needs, but generally a basic home loan is designed for someone who doesn't want an offset account. A borrower who presumably wants a low interest rate and nothing else.

But there are a couple of reasons why a borrower might prefer a basic, no frills home loan:

  • You don't have any money left over. Plenty of new buyers put all their money into their deposit, stamp duty and other home buying costs. If you don't have any money leftover, an offset account won't be that useful. At least for a while.
  • You want to put your savings somewhere else. Some borrowers might prefer to earn interest on their savings with a high interest rate savings account. Or they'd rather put their money in the stock market, or make extra contributions to their super funds instead.
  • You're happy making extra repayments. Many basic home loans (especially variable rate ones) let you make extra repayments on the home loan. While this isn't quite the same as an offset account, it gives you a similar benefit in that you can repay your loan faster and reduce your overall interest charges.

But should you get an offset account?

For many borrowers, putting money in your offset account represents one of the best ways to minimise your home loan costs.

Finance expert Nicole Pedersen-McKinnon considers offset accounts "the most powerful way of paying off your mortgage faster, easier and cheaper."

A home loan is a large debt, and being able to offset your loan principal and reduce your interest charges saves you a lot of money in the long run.

Sources

Richard Whitten's headshot
Senior Money Editor

Richard Whitten is Finder’s Senior Money Editor, with over eight years of experience in home loans, property, credit cards and personal finance. His insights appear in top media outlets like Yahoo Finance, Money Magazine, and the Herald Sun, and he frequently offers expert commentary on television and radio, helping Australians navigate mortgages and property ownership. Richard started his career in education and textbook publishing in South Korea. He holds multiple industry certifications, including a Certificate IV in Mortgage Broking (RG 206) and Tier 1 and Tier 2 certifications (RG 146), as well as a Bachelor of Education from the University of Sydney and a Graduate Certificate in Communications from Deakin University. See full bio

Richard's expertise
Richard has written 779 Finder guides across topics including:
  • Home loans
  • Credit cards
  • Personal finance
  • Money-saving tips
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4 Responses

    Brian's avatar
    BrianApril 30, 2015

    Hi im not sure if my last question sent or not
    I have a home loan with you and am wondering if we can make interest only payments for a couple months as we have had some unexpected expenditure of late
    Regards
    Brian

      Belinda Punshon's avatar
      BelindaMay 20, 2015

      Hi Brian,

      Thanks for your enquiry.

      As finder.com.au is an online comparison service, we are not a lender.

      You will need to contact your lender directly to discuss whether or not you can make interest-only payments for a given period of time.

      Thanks,
      Belinda

    Brian's avatar
    BrianApril 30, 2015

    I have a home loan with you guys and am wondering if I can make interest only payments for a couple of months as we have had some unexpected expenses of late
    Regards
    Brian

      Jodie Humphries's avatar
      JodieMay 11, 2015

      Hi Brian,

      Thank you for getting in touch.

      You have contacted finder.com.au a financial comparison site, please contact your lender directly to discuss alterations of your repayments with them.

      Regards
      Jodie

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