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‘Honeymoon’ home loans: sweet or sour?

Most lenders offer a home loan product with an introductory or ‘special honeymoon’ rate. Should you take advantage while you can, or are they more honey trap than honeymoon?

Introductory rates are usually lower than the standard variable home loans and run for a specific period of time, say six months or one year. Once the honeymoon is over, the interest rate on the loan will revert to either the standard variable home loan interest rate or sometimes even a higher interest rate.

These loans might be appropriate for people who want to minimise their initial repayments (whilst perhaps doing renovations) or for those who wish to make a large dent in their loan through extra repayments while benefiting from the lower rate of interest.

Be careful when choosing this loan, that you can afford repayments at the higher post-honeymoon interest rate level. You need to weigh up how competitive a loan will be over its expected life. It doesn’t matter how low a lender’s interest rate is for the first 6-12 months if you then end up paying far more than necessary for the next 29 years!

Tip: If you start paying off this loan at the post-honeymoon rate, you will effectively be paying off extra and will not have to make a lifestyle change when the introductory offer has finished.

About Adam Nobel

CEO | Principal
M. Bus, Grad Dip Adv, B.Int Bus, LREA


0417 007 001

Adam is the founder and Principal of Hugo Alexander Property Group. With a previous career in advertising, 22 years experience in property investment, and 16 years in Brisbane real estate, he knows the market inside out to ensure his clients grow their wealth faster.

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