Introductory variable rate home loan comparison
An introductory home loan can come with a super-low rate, giving you a chance to make early headway on your loan. Compare honeymoon introductory rate home loans.
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An introductory variable interest rate home loan can be lower than other rates, helping you ease into your mortgage commitments with less financial pressure.
While an introductory competitive rate loan can help you during the initial stages of your loan, you need to make sure that you effectively plan for the anticipated rate rise when the interest rate reverts back to the standard variable rate offered by the lender.
Introductory variable home loan comparison
In the table below you can compare a range of home loans with introductory variable rate offers. Please note that some of these products are offered by partners and you can click through from the table to their websites. You can compare a wider range of products on our variable loans page.
What is an introductory mortgage?
Introductory home loans are often called honeymoon home loans because they can be popular with first home buyers who have saved hard for their deposit and other home loan costs, and need a little more room in their budget for the first few years of their mortgage while they rebuild their savings. Anyone can benefit from an introductory variable rate though, even if you are a second home buyer, refinancing or investing.
An introductory variable interest rate is applied to an introductory home loan for a set period of time, usually 6 months to 3 years. At the end of the introductory period, your home loan interest rate reverts to the lender's standard variable interest rate for your loan type.
Below are some of the benefits of an introductory home loan:
- An ongoing introductory low interest rate. Introductory variable rates are becoming a very competitive loan product and, as a result, are some of the lowest available on any loan type.
- An introduction to loan repayments. If you are a first home buyer, mortgage repayments can come as a big shock to your budget. Even if you are buying a second home or refinancing, you may be borrowing more money and therefore making higher repayments. An introductory variable rate allows you to ease a lower loan repayment into your budget, rather than having to make higher repayments from the beginning.
- More funds to cover the costs of buying a home. When you buy a new home, there are more costs to pay than just repayments, including loan fees and stamp duty. There are moving costs, the cost of new furniture and, of course, paying for the house warming party. With a lower introductory variable rate on your home loan, you can free up cash for these new home costs.
- You can choose flexible repayment options. An introductory variable rate can be applied to various types of loans, so if you shop around you can find a loan with additional repayment and redraw facilities, and even an offset account to save you even more.
Considerations when taking out an introductory variable rate
As with any loan product, if you use an introductory variable rate loan outside of its intended parameters you can be penalised. Therefore, make sure you can avoid pitfalls such as:
- Some limited features. Make sure your introductory home loan has all of the features you want and need in a loan, as some may limit the number or value of additional repayments which can be made during the introductory period.
- High standard variable rate. When comparing introductory variable rates, be sure to compare the lender's standard rates too, as you could be faced with much higher repayments than expected when your introductory rate reverts to the standard rate.
It may also be a good idea to consider making higher repayments from the get-go, so you can get ahead on your mortgage from day one. For instance, let's say you have a home loan of $500,000 and an introductory variable rate of 2.5%. Looking ahead, you can see that a standard variable rate is more like 2.8%.
Consider calculating the difference between the rates and making repayments at the higher level from day one. It means you will:
- Have the peace of mind that you can afford the mortgage, when your interest rates increase.
- Start repaying more of the principal from day one, so you'll repay the loan faster.
- Own your home outright sooner, due to the extra repayments.
Based on our example $500,000 home loan, your monthly principal and interest repayments would be $1,975 at 2.5% and $2,054 at 2.8%.
That's a small but significant difference of around $75 per month. Now, if you make the higher repayment from day one of taking out the loan, and you continue to add $75 to your monthly home loan repayments, you'll save $14,340 in interest throughout the loan. More importantly, you'll own your home outright 1 year and 7 months sooner.
How can you find ongoing lower interest rates on your home loan?
Not all types of home loans come with the option of a lower introductory rate, especially low doc home loans and construction loans, but there are other features and home loan types which can save you in interest.
Introductory variable rate home loans can also be found with some or all of these features, so you can continue to save on interest with:
- An offset account. An offset account is a transaction account which is linked to your home loan account and the balance of the offset account reduces the amount of your loan which attracts interest. For example, if you have a $250,000 home loan and you have $10,000 in your offset account, you pay interest on just $240,000. This then means your monthly repayments are lower as they are made up of less interest, so if you continue to make the same monthly repayment, the extra amount will come directly from your principal loan amount and you can repay your loan sooner, because you pay less interest.
- A professional package discount. Many lenders will offer a discounted interest rate as part of a professional package if you borrow over a certain amount. The discount often increases the more you borrow and can be an ongoing interest rate discount for the life of the loan, up to 0.7%.
- A basic home loan. A basic home loan is one without any additional features or products attached. As such, this simple loan product charges the lowest interest rate of any loan product, often up to 2% lower than a standard variable interest rate loan.
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