What Is An Introductory Rate Home Loan?

Today we will look at what an introductory rate home loan is. An introductory home loan is generally a home loan with a discounted interest rate for a period of time. After the introductory period the home loan will usually revert to a higher interest rate.

Introductory rate home loans are generally will have variable interest rates. There are some good introductory rate home loans available today. Some are better than others, it really depends on the interest rate offered, how long the introductory interest rate period lasts for, any fees associated with the home loan (like application or monthly fees) and what the interest rate reverts too after the introductory period has finished.

If you are considering an introductory rate mortgage, it is wise to take into account the fees associated with the home loan, and consider what your repayments might be after the introductory interest rate period has finished. The interest rates on introductory rate home loans after the initial cheaper period can be more expensive than a discounted basic home loan, so even though at the start you may think you have a good interest rate, it may change after the introductory rate period has finished.

With some banks or lenders you may be able to switch the introductory rate home loan to another mortgage after the introductory rate period has finished. There may be a switch fee involved, which can cost from $300 or more. Some banks or lenders though, with introductory rate home loans, may not enable switching of the home loan, or the fee could be quite high if you want to change to a different mortgage after the introductory rate period has finished.

It is important to understand all the costs involved with your home loan. As with some introductory home loans, it may appear cheaper, based on the starting interest rate, but in fact, it may be more expensive in the end, when you consider all the costs involved.

A good mortgage broker will be able to help you understand the costs with introductory rate home loans, and compare them to other home loans, to see which are more suitable to your needs and are more cost effective.

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