Introductory variable rate home loan
Few people would turn down a helping hand with their initial home loan, so an introductory variable rate home loan might provide the initial financial support that you need, especially if you are a first time buyer. You could get a very competitive rate to start with, enabling you to plan your finances for the future.
What is an introductory variable rate home loan?
Often known as honeymoon loans, an introductory variable rate home loan is popular with first time buyers because they are likely to have saved hard for their deposit and the other costs associated with buying a home. They could do with a little space to rebuild their finances as they embark on their first mortgage and this type of loan could help. If you're in that position then it's worth investigating the options, but it can also be available if you are a second homebuyer or looking to refinance or invest. You'll be offered a lower rate than the lender's standard for a fixed period, and this can be attractive when you are seeking to save money on your monthly outgoings.
How does an introductory variable rate home loan compare to other products?
This type of home loan can compare well with other products on the market but you should always look around and make comparisons. Examine the amount of time such a loan will be active for before it reverts to the standard variable interest rate the lender charges. You may be considering a fixed rate loan but are not sure if that is suitable in the early stages of a mortgage. You should therefore expect your interest rate to be lower with an introductory variable rate home loan and you could make useful savings as you start or continue on the home owning ladder.
What are the main features of an introductory variable rate home loan?
Your interest rate may be lower than the normal rate to give you more control over the amount of your initial outgoings when buying a home. It allows you to budget precisely over the agreed term, a benefit that lenders use to attract borrowers in the first place. If you get a good initial variable rate deal the chances are you are more likely to stay with that lender because you will have saved a fair amount in interest charges on your repayments.
Are there risks to consider?
You must factor in what happens when your introductory variable rate ends. It's essential to plan ahead for when your payments will increase, so that means checking on interest rates and keeping in touch with your lender so you don't get any unpleasant surprises. You may discover you are locked in to the lender after that introductory period so look carefully at the agreement you make so you know what your options are when that cheaper rate finishes.