Originally designed for first-home buyers, but now available more widely, introductory loans offer a discounted interest rate for the first six to 12 months, before the rate reverts to the usual variable interest rate.
Repayment Options
Principal & Interest
Repayments are calculated on the total term of the loan and the fixed interest rate that you select.
Weekly or fortnightly repayments
Instead of a regular monthly repayment, you pay off your home loan weekly or fortnightly.
This can suit people who are paid on a weekly or fortnightly basis, and will save you money because you end up making more payments in a year, cutting the life of the loan.
Interest only
You only pay the interest on the loan, not the principal, usually for the first one to five years although some lenders offer longer terms.
Many lenders give borrowers the option of a further interest-only period. Because you’re not paying off the principal, your monthly repayments are lower.
These loans are especially popular with investors who pay off the principal when the property is sold, having achieved capital growth.
Other Features
Direct Debit
Your lender automatically draws repayments from a chosen bank account. Apart from ensuring there is enough cash in the account, you don’t have to worry about making repayments.
Professional package
Home loans over a certain value are offered at a discounted rate, combined with discounted fees on other banking services. These can be attractively priced, but if you don’t use the banking services you may be better off with a basic variable loan.
Offset account
This is a savings account linked to your home loan.
Any money paid into the savings account is deducted from the balance of your home loan before interest is calculated. The more money you save, the lower your regular home loan repayments.
You can access your savings in the usual way, by EFTPOS and ATMs.
This is a great way to reduce your loan interest, as well as eliminate the tax bill on your savings.
Lenders provide partial as well as 100% offset accounts.
Be aware the account may have higher monthly fees or require a minimum balance.
What you should know
Benefits
- Lower regular repayments for an initial ‘honeymoon’ period.
- Gets you off to a great start when it comes to your home budget
You should be aware of
- Loans may have restrictions, such as no redraw facilities, for the entire length of the loan.
- You may be locked into a period of higher interest rates at the expiry of the honeymoon period
