Honeymoon home loan rates

August 17, 2015
Herman Esterhuizen

It can be tempting to look for a lender offering a low introductory rate but it pays to choose wisely. The relationship could sour once the honeymoon is over.

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Mortgage Choice has been helping Australians find the loan best suited to their needs since 1992, and during that time we have seen all sorts of loan perks being offered by lenders.

One such sweetener is the ‘honeymoon’ rate – in other words a loan that comes with a very low introductory rate.

The idea behind these loans is simple. The mortgage comes with a low interest rate for a specific period in order to attract borrowers. In fact, in some cases we have seen introductory rates that have been as much as one percentage point below the standard variable rate.

However once the introductory or honeymoon period has come to an end, the interest rate usually reverts to a much higher standard variable rate.

Watch for distractions

The problem with any short term benefit – like a honeymoon rate – is that it can distract borrowers from more important issues, like the ongoing revert rate, the presence of loan fees, and whether the loan features are right for your circumstances.

Honeymoon rates certainly aren’t the only sweetener that can sidetrack borrowers. Some of the other perks we have come across in recent years include home loans offering frequent flyer points or cash back deals, and even loans with a free holiday thrown in.

But when you think about it, these are all very short term benefits particularly in relation to the overall term of your home loan. And of course, there’s no such thing as a free lunch – an upfront freebie may come at the cost of a high ongoing rate, more fees or restrictive features. Worse still, if it turns out the loan isn’t the right choice for your situation, you could face the hassle and potential expense of refinancing to a different loan later on.

A good loan ticks all the boxes

Choosing a home loan is an area where Mortgage Choice home loan experts offer real value. We don’t just crunch the numbers to ensure the loan is competitively priced, we also look beyond any smokescreens to check that the loan has the features you need and the flexibility that allows the loan to fit in with your lifestyle.

To learn more about the some of the main types of home loans available take a look at our factsheet, or for tailored home loan advice, contact me today on 0432 507 101

Posted in: Home loans

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