Introductory & Honeymoon Loans
Honeymoon home loan rates
Honeymoon or introductory rates are offered to entice borrowers with a low advertised home loan interest rate that may be as much as one percentage point below the standard home loan rate and therefore look very attractive. The rate can be fixed, capped or variable for the first 6 to 12 months of the home loan. After that period, they usually revert to the standard variable rate offered by that lender.
Information or comparison
If you would like to talk to us confidentially about honeymoon rates or home loans and how they work, email us the form below or call at any time on 13 XINC (13 9462) and we will return your call within 2 business hours. or make an appointment to talk to a local mortgage broker.
how Honeymoon home loans work
One way lenders can offer cheap interest rates like honeymoon rates is by limiting the options and features on a home loan and this can mean little flexibility if your situation changes. You might also be required to keep the loan for a specific period of time with strict rules about how you make payments and when you can pay out the loan. This doesn't matter of course if you know your circumstances are not going to change. Always ask for the comparison rate so you know what you are really paying in the long term and ask about deferred establishment and exit fees so that you know what you are up for if you change your mind part way through the 'honeymoon' or 'post honeymoon' agreed terms. Talk to a mortgage broker to help you assess all the pros and cons.
Pros of honeymoon home loans
- Among the lowest rates available
- Repayments made at introductory rates can reduce principle quickly as there is less interest charged during the specified period, compared to higher variable interest rate loans.
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Cons of honeymoon home loans
- Repayments increase after the introductory period, since the interest rate reverts to the standard variable rate
- May have early repayment fees (or exit fees).
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Interest Rates Are Important, but Flexibility May be too
The point to really bear in mind is that the interest rate is only part of the overall pricing you should be looking at when you take out a home loan. Typically if you pay a slightly higher interest rate, you get a range of additional features. Things like redraw facilities and internet banking may be features that you are willing to pay for. If you don't need them, they can be an unnecessary expense. But also bear in mind that being locked into a cheap rate with tough rules for a long time may look cheap on the surface, but it may not always turn out that way in the long term. Try to make sure you take an extra few minutes to understand what all the different features and offers are and what they might mean to you over time. It's worth it!
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