Honeymoon Rates
Many home loan lenders offer low initial interest rates which are called honeymoon home loans.
This deal attracts a lot of borrowers for a honeymoon home loan offers a lower interest rate for around six to twelve months. After the said time period, the interest rate goes back to the standard variable rate that the lender offers. This set-up gives borrowers, especially start-up families, to save up finances.
The length and interest rate of the introductory rate depends on your lending partner. Therefore, it would be better for you to shop around and compare the deals that different lenders offer.
Obviously, honeymoon loans provide useful savings for not only can you save on interest payments but these payment cuts offer more repayment discounts in the long run. This set-up makes a honeymoon rate a very tempting deal.
However, this deal entails a number of restrictions as well. Because of the low rates, many lenders will limit its available features which result in little to no flexibility over the home loan term.
Also, many honeymoon deals have steeper early repayment fees during the first four or five years of the term. It can also entail higher ongoing or establishment fees. There are even situations wherein lenders set a limit to the amount that can be repaid every month.
On the other hand, a honeymoon deal can be of a disadvantage if you have a fixed deal and the standard variable rate decreases during the fixed period. Also, failure to satisfy repayments will trigger the banks to charge penalties if you discharge your deal within three or four years.
Finding the best honeymoon home loan requires research. By doing so, you can even find out that you can end up with a more flexible deal if you sacrifice a temporary repayments savings. To get a better picture on this, it would be better for you to consult a home loan consultant.
