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Which loan could save you over $1700?

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If you're like many first homebuyers, you may find yourself weighed down by the mounting expenses that come with buying a home. An introductory or 'honeymoon' rate home loan may be just what you need to help you get ahead financially during these challenging times.

To help you in your search for the best value introductory loan, the team at Your Mortgage trawled through a wide array of products to bring you the cheapest introductory home loans in the market.

And the winner is...

Colonial products of CBA 3 Year Special Rate Saver stole the show - emerging as the best value introductory loan in Australia.

With an interest rate set at an attractive 7.34%, this loan is $1,768 cheaper compared to the average introductory loan in our books when held past the three-year mark. The Special Rate Saver could save you $3,169 over the five-year period, and $6,672 over 10 years. This product also has an introductory period of 36 months - one of the longest honeymoon periods on offer in the market.

Pepper Homeloans' offering - Pepper Clean to Pepper C intro loan - bagged the best value intro loan in the three-year category. The attractive interest rate of 6.79% that reverts to 7.79% could save you $2,381 over three years when compared to the average loan in the Your Mortgage database.

What makes a winner?
The Colonial product allows higher repayments during the introductory period and the ability to access the funds at a later date. The home loan is also available up to 95% LVR with lenders mortgage insurance (LMI) and 80% without.

"The low rate and nil fee offer give Commonwealth Bank's 3 Year Special Rate Saver the competitive edge. It's a great deal for first homebuyers and borrowers on a budget who want a quality product with a great rate and no application fee or loan service fees," says CBA's head of third party banking, Kathy Cummings.

 "The most appealing features of the 3 Year Rate Saver are the low rate of 7.34%, which is 0.73% off the current standard variable rate, plus the double nil fee offer of $0 upfront establishment fee and $0 loan service fee for the life of the loan - a fee-free loan," she adds.

This winning product was also recently named Best Introductory Loan offered by a bank in the recent Annual Mortgage of the Year Awards conducted by Your Mortgage.

Pepper Homeloans' Pepper Clean has introductory rates starting from 6.79% pa for the first 12 months, which revert to 7.79% pa at the end of the introductory period. A deferred establishment fee (DEF) of 3% of principal for the first three years applies if you pay off your mortgage during that time. However, if you hold the loan for more than three years, the DEF is waived. In addition, customers qualify for a 1% loyalty bonus at this time.  This means that a customer who borrowed $300,000 can get up to $3,000 rebated on the three-year anniversary of their loan - provided they have been consistent with their loan repayments during the previous 12 months.

How the loans were compared
The team at Your Mortgage has worked out the 'true cost' of all 25 introductory loans in our books by taking into account every fee, including upfront and ongoing fees and DEFs.

By working out how much each home loan will cost after a range of time periods - three, five and 10 years - we show you the impact that these fees can have on the total cost of your home loan. Starting with principal and interest (P&I), we calculate the cost of P&I over a mortgage life of three, five and 10 years. The result is the true cost of the loan and all applicable fees.

This month, we based our calculation on a loan amount of $250,000 at 89% LVR taken over 30 years.
 
The 'overall winner' is assigned to the product that is the best value in all categories. The 'winner' label is assigned to loans that are the best value in their category and 'recommended' is assigned to loans that performed well in all categories.

Check out the latest issue of Your Mortgage for the full list of top rated home loans.

It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan

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