Honeymoon home loans

Author: ME

Published at: 6/21/2016 3:29:21 PM


Honeymoon Home Loans


It’s all good at first but the relationship can quickly hit the rocks when the honeymoon ends.


Chances are you and your home loan are going to have a long term relationship, and like all good twosomes you want the initial euphoria to last as long as possible.


However when it comes to honeymoon loans, you could quickly discover the product you end up with turns out to be very different from the loan you first met.


The low rate introductory won’t last forever


On the face of it, honeymoon - or introductory rate - home loans can seem like the perfect match for first home buyers.


These loans typically feature a compelling low interest rate for the first six to 12 months. It means the monthly repayments may be low, giving first home buyer the illusion of greater value and affordability.


But fast forward to when the honeymoon period ends, and the low rate is likely to leap back up to the lender’s standard variable rate, which can be higher than for other standard loans.


The higher rate can be hard to live with


It means that virtually overnight a first home owner can go from a modest monthly repayment to a far higher repayment – something that can come as a serious shock to your budget.


And while honeymoon home loans may be marketed on the idea that the low rate period provides a chance to pay a bit more off the loan, the reality is the introductory period is often too short to be of any great value. 


Look for a consistently competitive rate


A honeymoon should be memorable for all the right reasons. It should certainly be more than a marketing gimmick. With any loan that involves more than one rate over different timeframes, always check out the ongoing rate to know what your loan repayments will look like over the longer term. It means no nasty surprises that could see you looking to refinance your loan sooner than you’d like.  


Choosing a home loan with a consistently competitive rate and zero monthly account fees is a far better way to enjoy a healthy long term relationship.