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Introductory Home Loans

Introductory loans are particularly attractive to borrowers who are new to the Melbourne property market and first time investors who want lower repayments at the beginning of the loan.  The lower repayments are great for these borrowers, as they adjust to the repayments and consider other costs involved with the purchase of property.Introductory Home Loans

Also known as ‘honeymoon rates’, these loans usually come with the lowest rates in the market, and are becoming increasingly competitive.  Introductory loans offer low interest rates for a set term, which usually will be from between 6 months to 2 years.  The rate is discounted to attract customers to the loan, and also because the loan will have fewer features and options.

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There may be fees for early repayments, so if you are after flexibility in your home loan, you must consider this and also ask about establishment and exit fees. 

After the ‘honeymoon period’ is over, the rate on your home loan will revert to what the variable rate currently is with that lender, and your repayments will increase to a higher amount each month.

Advantages
The main attraction of these loans is the lower interest rates and lower repayments at the start of the loan.  It offers borrowers the chance to adapt and adjust to the repayments during the introductory period.  The lower payments allow customers to use the extra funds for other expenses, which can be very useful for people who also need to pay for moving costs and legal fees.  Another advantage is that these loans are becoming increasingly competitive which means that borrowers should shop around as there are some great deals now being offered.

Considerations
When the introductory period ends, the interest rate is likely to be higher.  Customers need to find out what the rate will be once the loan reverts to make sure that they are paying a competitive standard variable rate once the honeymoon period is over.  Borrowers should also ask if the loan will revert to a fixed or variable rate, and whether there are any costs involved for changing or switching the loan during the introductory period.

These loans are suitable for first home buyers who are just starting out as they can benefit from lower repayments at the beginning while adjusting to the commitment of a mortgage.  Also, if you are considering refinancing and need more cash short term, you can take advantage of the discount rates and lower repayments.

To get the best advice when considering any type of mortgage, speak to a Local Melbourne Mortgage Broker. Call us on or submit your enquiry via our on-line form.




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