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.
Let us keep you updated with the latest information so you can reach your goals faster.