Introductory loan

Introductory loans are often used to entice borrowers to take out their mortgage with a particular lender. There are usually some great deals on offer - but make sure you understand the cons, as well as the pros.

What is an introductory loan?

Some lenders will offer home loans with a particularly low interest rate for a short period at the beginning of the loan term - to attract borrowers. Also known as a honeymoon rate, this rate generally lasts only for around 12 months before it rises and reverts to standard variable rates.

What are the pros and cons?

Pros:

  • Usually the lowest available rates
  • Significant principal reductions can be made during the introductory rate period by paying an increased instalment
  • Some lenders provide an offset account against these loans

Cons:

  • Payments usually increase after the introductory period

Not sure if an introductory loan is right for you? Learn about the other loan types available here.

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