An introductory variable interest rate home loan can help you lower your periodic repayments as you ease into your mortgage commitments.
While an introductory competitive rate loan can help you during the initial stages of your loan, you need to make sure that you effectively plan for the anticipated rate rise when the interest rate reverts back to the standard variable rate offered by the lender.
Advantages of an Intro Rate ‘Honeymoon’ Loan?
Usually this type of loan offers the lowest rates on the market.
Some lenders provide offset accounts on these loans.
Opportunity to reduce the principal quickly during the ‘honeymoon’ period.
Disadvantages of an Intro Rate ‘Honeymoon’ Loan?
Honeymoon rates are tempting, but watch out for restrictions or exclusions on other aspects of the loan. Most of the time, payments will increase after the initial introductory/’honeymoon’ period.
At hand, expect the possibility of incurring penalties on exiting from the loan during the honeymoon period. Given that it only lasts a year and during that year it will be saving you money, that’s not usually a problem. Nevertheless at times there are penalties for exiting the loan two and even three years after the honeymoon is over. This probably be worth your while, but don’t underestimate your own need for flexibility, and the fact that it puts the lender be on control if you’re looking for a better deal.
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