Honeymoon Rate Home Loan

Understanding Your Home Loan

Accrete finance mortgage home loans for all of your needs

You will find some excellent honeymoon rate home loan products (also referred to as introductory or discounted rates) on offer in the home loan market. But don't be fooled into rushing in to a loan because it has a low introductory rate.

Introductory or Honeymoon home loan rates are used by lenders to attract your business, they lure you with attractive discounts off your home loan.

Discounted home loans are right for some customers, but not everyone. Before you take out a discounted home loan you need to understand how they work, what are the pitfalls and benefits, choose the right one to meet your requirements.

What are honeymoon rate home loans?

A honeymoon, introductory home loan is where the Lender guarantees you a discounted interest rate during the early stages of your home loan.

How does a Honeymoon rate work?

The introductory rate can be fixed, capped or variable for the first 12 to 24 months of the home loan. Honeymoon rates are a low advertised home loan interest rate. They are generally cheaper during the introductory period, (around 1-1.5% below the standard variable rate).

After that period, they usually revert to the standard variable rate offered by that lender.

This will mean that the loan repayments on honeymoon period home loans will be lower. On a loan of $350,000 you could be paying around $450 less a month on a discounted home loan.

After the 'Honeymoon Period' your loan will revert to the standard variable rate at the time.

In order to offer you the discounted rate lenders will structure honeymoon period home loans slightly different to the standard home loan.

They may do all or some of the following:

Limit the flexibility if an introductory rate home loan. It could have limited options or features, providing little flexibility if your circumstances change.
Required that you keep the loan for a specific period of time
Have strict rules about how you make payments (for example monthly payments only)
Charge an early termination fee, if you pay out the loan early

Honeymoon rates are generally cheaper during the introductory period and therefore your repayments are lower. A discounted loan may look cheaper on the surface but it may not turn out that way. You usually find that you are locked into a contract to take the standard variable rate for a set period of time after the honeymoon period is over.

This will increase your minimum monthly repayments by a significant amount. If you break this contract you may attract an 'Early Termination Fee' or 'Deferred Establishment Fee' which means the loan may not be all that attractive over a longer period of time.

Remember

The Interest Rate is only part of a honeymoon rate home loan package,you need to look at the big picture. You need to take the time to understand the features and benefits of a honeymoon home loan and what it means to you.

Talk to your Accrete Financial Solutions Mortgage Broker today, they will help you assess all the pros and cons of taking out a Honeymoon rate home loan work out what is best for you.

Our time wont cost you anything, should you choose to take out a loan with us then we will be paid a commission by your selected lender on settlement of the loan.