Also known as “honey moon” loans, these loans offer a lower interest rate, usually for a period of six to 12 months, sometimes longer. The average reduction is 0.5% off the standard variable rate, but this can vary between financial institutions. At the conclusion of the introductory or honeymoon period the interest rate usually reverts to the institution's standard variable rate.
Most lenders will offer an option of fixed or discounted variable rates over the term or discounted variable rates over the term of the introductory period (capped rates may also be available). Loan features will vary, but many lenders offer the same features as the product the loan rolls over to at the conclusion of the introductory period.
Positives of an Introductory Rate Loan
These loans are well suited to first homebuyers who can use the savings to buy furniture or pay for legal fees and mortgage insurance. They're also good for people on restricted incomes for 12 months or so but who expect to be in a better financial position from then onwards. The main benefit is that you have a softer introduction to the product because you pay lower installments during the intro period which helps get ahead financially during those months.
- Suitable for first home buyers who are breaking into the mortgage market for the first time, hence benefiting from lower interest rates during the honeymoon period;
- Introductory rate home loans are also worth considering if you are refinancing and seeking a short term financial boost.
