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Introductory & Honeymoon Loans
Buying your first home and daunted about the monthly payments?
An introductory loan makes the transition to mortgage payments a little easier.
With an introductory home loan, you pay a lower interest rate for the first year of your mortgage before moving to paying standard interest.
It allows you to gradually adapt to paying your monthly mortgage.
You must take care to check the terms of the loan – there are some potential pitfalls to watch for.
We can help you decide if an introductory loan (and which one) is right for you.
If you’re considering an introductory loan, come and speak with us first. We’re here to share our expertise and guide you in the right direction.
Why an introductory loan
Introductory mortgages allow borrowers to spend the first year of their mortgage with a lower than usual interest rate.
After one year, the special low rate of an introductory home loan reverts back to the normal rate offered by your lender. At this time, you will usually switch to a fixed or variable home loan.
Taking up the offer for an introductory loan can mean that you are able to make savings during your first year or even make higher payments than necessary to reduce the principal.
It’s important to remember that lenders offer these services to help them sign up new customers, and so you must be careful that you are still getting a competitive deal for your mortgage, particularly when the honeymoon period finishes and you begin paying normal interest rates.
Introductory loans are also called honeymoon loans and with good reason. Like a honeymoon, they’re removed from the real world, your rose-coloured glasses firmly on as you enjoy that first period of home ownership with only low repayments. But like with a relationship, if you don’t check the details before committing, once that honeymoon is over you could be dealing with a nightmare.
What to watch out for
There are a few things to look for when assessing an introductory loan.
Does it have:
- A competitive interest rate after the first year?
- Higher early repayment or exit fees?
- Higher establishment charges?
- Ongoing fees?
- Limits to your repayment options during the special interest rate period?
We can help you decide if your introductory low interest rate is comparable when you include fees, charges, and future rates.
We place huge emphasis on educating our clients, so that they can be personally confident in their decision.
Below are some of our most useful resources to help get you into your first home.