Honeymoon home loans are a popular choice for many first home buyers. Below we discussed the advantages offered and some of the home loan options available.
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What Is a Honeymoon Home Loan?
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Honeymoon rate, or introductory rate, home loans offer a low interest rate for an introductory period, usually the first 1-3 years of the loan. At the end of the introductory period, the interest rate usually reverts to a higher rate.
For a first home buyer, a honeymoon home loan means lower repayments in the early years. This can be a big advantage when you’re facing the costs of setting up a new home for the first time.
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What should I look out for?
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Whilst you want a low initial rate, you should also check what interest rate the loan reverts to at the end of the introductory period. This is often, but not always, the lender’s standard variable rate and can be comparatively high.
To alleviate potential concerns, some lenders offer an interest rate guarantee, so you know upfront that the ongoing rate will remain competitive. For example RAMS Rate Relief home loan offers a 0.9% p.a. discount off the RAMS standard variable rate for the first two years of the loan, and the ongoing rate is guaranteed to remain 0.2% p.a. below the RAMS standard variable rate for the life of the loan.
Check out what fees are charged too. Some lenders may offer low interest rates but charge high on-going fees to compensate. Others, like the RAMS Rate Relief home loan have no ongoing account keeping fees, so your ongoing costs remain low.
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Anything else I should know?
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As always, check the home loan you choose offers the features you need. For example, if you’re paid an annual bonus or expect a tax refund at the end of the year, you may want to be able to make extra repayments from time to time, and also to have access to a redraw facility so you can access any extra repayments at a later time.
Or if you’re planning on starting a family, features such as a repayment holiday may be attractive to you. And of course, if you’re planning on making the most of the recent boost to the First Home Owner Grant and claiming the full $21,000 for building your first home, make sure it offers a Construction option!
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