Introductory Rate Mortgage

Introductory Rate Mortgage

Introductory Rate Mortgage loans are loans that have an introductory period. The introductory period is often attached to a discounted interest rate, much lower than the standard interest rates. Interest rates can be variable, fixed or capped. Once the introductory rate mortgage loan period expires, interest rates revert to the standard interest rates.

The purpose of introductory rate mortgage loans is for new buyers to ease into mortgage repayments. It will also help them get ahead in mortgage repayments so they can own their homes faster.

Introductory rate mortgage loans are usually offered to first-time homebuyers. Periods of introductory rates range from six months to three years.

The advantage of introductory rate mortgage loans is that:

1. It provides homebuyers with a head start on repaying mortgage loans
2. Introductory rate mortgage loans often offer the lowest possible interest rates in the market.
3. Sometimes, there is an offset account attached to an introductory rate mortgage loan, incurring further savings for the homebuyer.
4. The lower expenditure on the first few years will help new homebuyers with other expenses, such as construction, design and furnishing.
5. Introductory rate mortgage lenders usually offer flexible rates even with the introductory interest rate.
6. Introductory rate mortgage lenders are becoming more competitive, and interest rates are being pushed further down.

The danger of introductory rate mortgage is considering a loan solely on this basis, without computing the long-term effective interest rate. Introductory rate mortgage loan is good, in itself, but new buyers must also consider their long-term spending when deciding on an appropriate loan. Also, some introductory rate mortgage lender may impose more stringent fees for early exits.

All in all, introductory rate mortgage loans are the best option for first time homebuyers, single parent households, or borrowers with limited means in the present.