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Loans with Introductory Discounted Interest Rates

These loans offer a discounted introductory or 'honeymoon' interest rate which usually lasts for the first year of the mortgage. Some lenders offer this as a fixed rate, some as a variable and some offer both. After the first year the rate usually reverts to the 'standard variable' rate. With some lenders though,  if your loan amount and/or income levels are large enough (see Discount Packs), then you will also qualify for a discount off the standard variable rate after the first year honeymoon rate. Many lenders state that they need a loan to stay with them for a minimum period after the discounted introductory rate period for them to recoup the cost. Consequently, many 'Honeymoon' products contain an 'early repayment fee' clause in the contract. This, and any other loan termination type fee, should be taken into account if a client is considering taking advantage of an Introductory 'Honeymoon' Interest Rate Product in the first year and then either 'switching' products with the same lender, or refinancing elsewhere, afterwards.
Seven years is  a common 'benchmark' period, or term, to conduct mortgage comparisons over as it is a fairly close representation of the average life of a mortgage in Australia before it is either repaid or refinanced. Discounted Introductory Rate products can have interest cost advantages over many other types of mortgage scenarios when making comparisons over a seven year period but only if reverting to a good rate after the introductory period either by; (1) Default with the same lender (if you select the right loan and your loan amount qualifies). (2) Switching to another product with the same lender (not possible with many lenders until after a certain period on the higher standard variable rate). (3) Refinancing to another lender (remember to take both the existing loan's termination fees and the new loan's setup fees into account).

Call or email for lender's comparison rate schedules or specialised Mortgage Software generated comparisons that details relevant features of competing loan products side by side and also gives an AAPR (average annual percentage rate) which is an indication of the 'true' cost of the loan over a seven year term.

The above Honeymoon Loan content is information only and should not be construed as financial advice.

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