An introductory home loan is not as simple as it sounds.

An introductory rate loan is a home loan with a discounted interest rate set for an initial period.  When this set time is over the loan will revert to the lenders standard variable rate.

 

The honeymoon period does vary from lender to lender but is usually 1- 3 years.

 

These rates can be very enticing on first glance but it is worth doing your homework to understand all the pros and cons associated with taking out the special short term offer.

 

The introductory rate tends to be a fixed reduction on the variable rate so your interest will be calculated over the honeymoon period with a fluctuating lower interest rate.  It is worth considering how you would manage paying your repayments if they were at the full variable rate when preparing your budget.  You don’t want to get used to this lower rate as it is not for the life of the loan.

 

This is a fantastic time to pay off as much principal as you possibly can however some lenders do put a limit on the amount of extra repayments that are permitted during this introductory period.  You should make sure you ask if there are any restrictions imposed by your lender.

 

You should also know what the exit fees are if you refinance or pay out the loan during the honeymoon period.  These fees are in place to discourage borrowers going from one lenders introductory rate to another, and may cancel out any advantage you had with taking out this loan in the first place.

 

The major negative is that the loan will roll over to the standard variable loan product when the introductory period is up and this can be one of the lenders most expensive products in some cases.

 

Mortgage Choice in Mudgeeraba are mortgage brokers and home loan experts.  We can do the sums for you and let you see the bigger picture. 

 

Besides the introductory rate loans, which are well advertised, there are also discounted rates, professional packages and various home loan features – like offset that should be compared to find the right product for you.

 

Contact us today on 5559 2563 or drop into our office in Bell Central Mudgeeraba, just five minutes from Robina Town Centre and let us take the stress out of finding the best home loan.

Posted in: Interest rates

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