Introductory or honeymoon rate home loans offer you a discount off the standard variable interest rate at the beginning of your home loan. The discount can be up to one percent off the standard variable rate and is usually for the first 6-12 months of the home loan.
After this period has expired, the interest rate will revert to the mortgage lender's standard variable interest rate.
Advantages of an introductory home loan:
• Offers a low interest rate usually for the first year of the home loan
• The interest rate can be fixed or variable or capped
• During the honeymoon period, the interest rate cannot go higher, but it may go lower if the mortgage lender's standard variable interest rate falls
• Repayments made at introductory rates can reduce the principal quickly, as there is less interest charged during the specified period.
• An offset facility can usually be used in conjunction with an introductory home loan
Disadvantages of an introductory home loan :
• Repayments for your home loan increase after the introductory period, since the interest rate reverts to the standard variable rate
• If you have fixed the honeymoon rate and the standard variable rate decreases during this period, your honeymoon rate will not decrease
• May have early repayment fees (or exit fees) if you pay off the home loan sooner
• Most mortgage lenders will charge you a penalty if you discharge from this home loan within 3 to 4 years
• Some mortgage lenders may limit the availability of features, such as redraw facilities and extra repayments to offset the lower interest rate
Please use the home loan calculators available to check your borrowing capacity, loan repayment calculator or stamp duty fees. Alternatively, you can speak to one of the mortgage brokers at Intellichoice on 1300 55 10 45 for more information about our other home loan and mortgage loan products and whether an introductory home loan is suitable for your circumstances.