Introductory loans
Introductory loans offer low introductory interest rates for a set period – usually
between six months to three years. Also known as 'honeymoon rates', an introductory
loan allows borrowers to make significant savings off the term and amount of a loan.
After this time, the rate reverts to the lender's standard variable rate. It's important
for borrowers to check what this variable rate is and to ask for comparison rates.
Advantages of Introductory loans
- Provides you with a head start on paying off your mortgage
- They are becoming increasingly competitive
- Usually the lowest rates on the market
- Lower funds for the initial period allows money to be used on other expenses
- Flexible repayment options
- Some lenders provide an offset account
Considerations – Introductory loans
- Higher early repayment or exit fees
- Extra payments may be limited
- Payments may increase when the initial introductory rate period is over
Introductory loans are suitable for
Introductory home loans are an excellent option for first home buyers, newlyweds,
and borrowers on a budget. This type of product would also benefit those looking
to service their loan with an initial low interest rate – while becoming accustomed
to their regular repayments. This type of loan is not suitable for the self employed.
Examples of Introductory loans
- Yes Home Loans won the non-bank category for Best Australian Intro Home
Loan in the 2007 Your Mortgage 'Mortgage of the Year' Awards, with their
'Discount Credit Access' product.
- Colonial Bank won the bank category for Best Australian Best Intro Home
Loan in the 2007 Your Mortgage 'Mortgage of the Year' Awards, with their
'3 Year Special Rate Saver' product.