Beware Of Low Rates
First-Time home buyers who took out a mortgage with a low honeymoon rate will be in for a shock when their introductory offer expires, a mortgage broker has warned.
More than 170,000 people have taken up the Federal Government’s more generous first home owner’s grant since October last year.
The Loan Market Group said some of those first-time buyers may have chosen honeymoon rates, which were as low as 4.5 per cent. When this period ends their variable rates could increase up to 1.5 per cent.
Introductory rates could lull first home buyers into a false sense of security. Honeymoon rates are tempting but borrowers need to be aware of restrictions and exclusions on the loan such as significantly higher fees for early repayments and exiting the loan.
People also need to consider all the issues they will face such as starting a family and potentially moving to one income.
The government grant was reduced at the end of September from a maximum of $14,000
to $10,500 for existing homes, and from $21,000 to $14,000 for new homes.
It will return the original $7000 on January 1, 2010.
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