How Can You Make The Most Of A Honeymoon Rate Home Loan?
Among the many Central Coast home loans alternatives available, many lenders are now offering home loans with a low introductory interest rate. These have become identified as Honeymoon home loans.Increased competition between lenders has led to many available loan products and characteristics. The choices are particularly confusing for first home buyers since they try to choose the kind of loan that's best for their circumstances.The length of the introductory interest rate, the introductory interest rate itself as well as the interest rate you pay once the initial period ends, depends upon your chosen lender. It's worth shopping around, as different lenders offer substantially distinct honeymoon rate products.A discounted introductory rate for the first couple of months or years is a common feature on Honeymoon home loans. For instance, your introductory rate might be two per cent below the standard variable rate. Your fee will change if interest rates modify, but it will remain cheaper when compared with the standard variable interest rate.A couple chose a Honeymoon rate home loan for their new house over a period of one year with an attractive interest rate of 6.25%. After the initial honeymoon period, the interest reverted back to their lender's typical variable rate of 7.25%.In that first year, the pair elected to make repayments on their line of credit as if they were giving the higher interest rate. By doing this, not only were they prepared for the rise in repayments after the first year, the extra money paid each fortnight had lowered the principal of the loan too. This resulted in a significant drop in the required interest paybacks after the introductory period had finished.For other people, a lower introductory interest rate can mean lower repayments for the initial period, and much more funds available for other expenses, such as buying furniture for a new home.Honeymoon rates are tempting, however watch out for restrictions or exceptions on other aspects of the loan. Many lenders will limit the accessible features to offset the lower interest. This can result in limited adaptability over the term of the mortgage.Many introductory rate loans also have higher initial repayment or exit fees, particularly within the first four or five years following the first period. Higher establishment and ongoing charges can also add up. Some lenders even cap the amount that could be repaid each month during the introductory period.The honeymoon interval helps home buyers when they need it most, since they shell out for upfront costs such as stamp duty, legal and also moving fees. However, borrowers need to consider monetary conditions for the full life of their loan.In case you're considering obtaining a home loan with a starting or honeymoon rate, make sure you explore all your options first.