Variable Rate Honeymoon Periods

Home loans can have the option of honeymoon periods, generally for one year which can be variable, fixed or split. The low interest rate for one year reverts to the standard variable rate, however it offers borrowers the chance to reduce the principal quickly by making extra repayments in the first year.

The fixed honeymoon rate offers a fixed repayment rate for usually one year that will not move against the RBA increases or decreases, this loan though offers borrowers less flexibility than the variable rate during this time.

An offset facility can usually be used in conjunction with this loan, however a penalty fee is applicable for discharges within the honeymoon period.

Fixed Interest Rate Terms

Home loans can be fixed for a predetermined term including one year fixed, two years, three years and five year fixed rates. When you are locked into these fixed rate periods you are not susceptible to increases of the Reserve Bank’s official cash rate, although it is important to note that you also have less flexibility that includes being penalised for making extra repayments.

Line of Credit or Home Equity Line of Credit

Line of credit loans allow you to easily access equity in your home loan working much like a credit card, you are assigned a credit limit by your lender against your property. Although there are many benefits of a line of credit loan it usually attracts a higher interest rate so borrowers need to do careful research before deciding on this product. Usually the loan has no set term and is good for investment purposes, home renovations or personal purchases.