Intro rate home loan

Welcome to our Intro rate home loan information page: This page is designed to assist you in understanding the basics of this type of loan and to give you an understanding of some of the features and downsides.

About Our services:

  • Our brokers are experts in obtaining home loan approvals and specifically trained in loan structuring and credit policy, ensuring the best possible outcome for your needs.
  • We provide an Australia wide service, at no cost to you.The lenders pay us a commission for the introduction of your business.
  • Our website is designed to help borrowers understand the differences between loan types and the importance of having a mortgage broker to assist you in finding the right lender.
About the Introductory Rate Home Loan:

What is an introductory rate home loan?

Also known as an introductory rate home loan, the intro rate home loan is a loan that is offered at a lower rate for a very short time, usually just the first year. This loan can be suitable in certain circumstances only.

  • The intro rate home loan is only offered for new borrowings and will not be available as a refinance option for an existing loan with the same lender. It is a” teaser rate” for new business and it is purely designed to get new clients in the door, for the lender that is advertising it.
  • The most common forms of these loans will mean that the borrower will have a low rate for either one or two years in most cases, and that when this first or second year is finished, the interest rate will revert to the bank’s standard variable-rate. There are many pitfalls in this type of loan that you need to be aware of, to know if this will be suitable for you in the longer term.

Note: Some banks who provide the intro rate loans will not offer certain features such as construction lending, offset accounts and other benefits that you may need.

  • If you keep in mind that the banks don’t really like to lose money on any product, and that when they discount quite heavily, they will need to make up the difference somewhere. The ongoing loan after the intro rate expires will be where the banks make up the difference.

Should You Choose an introductory rate home loan?

  • It is certainly going to depend on your specific circumstances as to whether you should choose an intro rate home loan. It is important for you not to enter into a contract without understanding the implications that you are signing up for. The implications are generally after the expiry date of the intro period and certain loans can convert into an expensive lending proposition.
  • The problem is not normally which loan you are selecting when it comes down to an intro rate home loan. The bigger problem is if you have selected the right lender, and compared the different loans are out there with other lenders, to know that you are on the best deal.
  • Dealing with these loans on everyday basis is what we do. It will be fair to say that your average mortgage broker would have the ability to know many more options that will be available to you, to ensure that the right loan and lender will be selected. As our service is free, there are no downsides to calling and having a quick chat to find out the best way forward for you.

What benefits are there for you in an intro rate home loan?

  • It is obvious that the benefits to this loan will be a lower interest rate at the start of your loan and obviously a lower repayment amount.
  • Suitable for a client who needs a cheaper rate for a short term, say for example you will be buying a property and also selling a property. This would mean that you will be reducing your debt in the very near future after that property has been sold, meaning that this loan may be suitable for you. It will depend on which lender and what their loan will allow you to do once the intro rate expires.
  • It could be suitable for somebody who is going to be on a low income for a short time. For example if you are expecting your income to increase substantially in the very near future. This may be a mum going back to work after maternity leave or if your income is likely to increase via a promotion for example.
  • Where this intro rate home loan will help you is being able to make repayments on a limited income. Again, it needs to be investigated properly in order to know that long-term you are in the right home loan.

What do you need to be careful of in an introductory home loan?

The downsides to any intro rate home loan are not normally seen until your first or second year intro rate has been completed. This is where you will find that the home loan will convert to whatever was nominated in your contract when you first applied.

  • Obviously the rate is going to increase, therefore increasing the repayment amounts. You will also find that the loan that you are now in, will not have all of the normal features available to you and you may need to refinance or possibly apply for a different loan with the same lender.
  • Quite often you need to renegotiate the loan with the lender to achieve maximum discounts, benefits and features. In most cases the loan that you are going to be on after the intro period is going to be higher. That is the way these loans are designed – maximum profit for the lender.
  • So in a nutshell, an intro rate is to get you to become a customer of the lender by having a lower rate, and the bank will be fairly determined to recover those costs once the loan switches to the higher variable interest rate. There are many lenders out there will be unwilling to assist you to obtain a lower rate after this introductory rate has expired. It is very common to see the lenders offering the cheapest loans with the following wording: “for new customers only”, which now excludes you, as you are “an existing customer”.
  • The introductory rate home loan is traditionally a very restrictive loan. And on top of these restrictions there are normally a set of conditions that are there to make sure the bank maximises its return. An example of this is where you have your introductory rate and you fall behind on a payment which means the bank now has the right to charge you the standard higher rate. This will obviously erase all of the benefits from the loan that you applied for in the first place.

How can I apply?

These are your simple steps to apply for a loan.
  • Contact us on the numbers above to speak to a mortgage broker, or complete our online enquiry form.
  • You will speak with a broker who will take into account your needs by discussing not only your requirements, but also any concerns you have, and offer you some possible strategies and ideas that you may not have thought about.
  • Once we know what you require, we will draft and email you a proposal– this will usually consist of a few options that are easy to understand.
  • Once you have had a chance to look at what options are available, you can contact your broker or the broker will call you, to discuss the proposal.
  • You can then decide if you wish to proceed or you may just want to discuss more options.

What are my other options?

There are many options available:
  • Whether you are after a variable interest rate, a fixed interest rate, interest only loan, equity loan or any of the other loans available, it is important that you find out what is available to you before applying for a loan.
  • The loans listed below are available for most lending purposes. Whether you are refinancing your home loan to a lower rate, or a property investor looking to buy that second or third property, we will have some ideas for you to consider.
  • Even if you are a first home buyer purchasing a new home or renovating your existing home, there are some great deals available from the banks and lenders that we are accredited with.
  • Please click on a link below to learn more about other loans that are available to you.
Summary:

NOTE: These pages are of general advice in nature. They have not taken into account your specific needs and objectives and are therefore designed to provide general information only. Before acting on any of the information contained on our website please have your Mortgage Broker assist you in determining the right product for your individual needs.

Posted 20 February 2015
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Specializing in Residential and investment lending.

Mortgage finance brokers located in the Wollongong, Corrimal, and Kiama and Shellharbour areas.

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