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Home Loan Introductory Rate Loan Calculator

Use Savvy’s smart introductory rate loan calculator to compare loans and find out whether they’re the best for you.

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, updated on August 8th, 2023       

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Calculate whether an introductory loan is your best option

Introductory rate home loans can offer the temptation of a very low initial fixed interest rate, but do such loans really save you money in the long-term? Use Savvy’s introductory rate loan calculator to work out exactly how much they may cost you over the whole life of the loan so you’re able to compare and make an informed decision about whether they’re right for you here.

Introductory home loan rates explained

How do I use the introductory rate loan calculator?

It’s simple to calculate your house buying fees with Savvy’s calculator.  First of all, enter your loan amount, your loan term and whether you’ll make repayments monthly, fortnightly or weekly.  Use the green arrow button to change the frequency of your repayments.

Next, enter the term of your introductory period, your introductory interest rate and the variable interest rate your loan will revert to.  Click anywhere on the page to view your results. 

You can also use this as a cost of buying a house calculator too, as it’ll show you the total interest payable with your introductory rate, as well as the interest you would pay if you didn’t have an introductory rate.

Use this handy house buying fees calculator to compare loans both with and without an introductory rate to see which loan is the cheapest in the long run.

Do all lenders offer introductory home loan interest rates?

No – not all lenders offer introductory rate home loans, although there are plenty of them available through online lenders.  They’re often targeted at first homebuyers (or to attract borrowers to switch home loans) if a lender is wanting to increase its customer base.

When the home loan market tightens and competition between lenders becomes more intense, however, an increased number of introductory rate home loans are offered as lenders scramble to increase or maintain their market share.

Are introductory rate home loans always the best option for me?

They can be, but not always.  An introductory loan may appear attractive at first, but it is well worth comparing them with other loans also, as they may not be the cheapest option in the long run.   The reason is because after the initial introductory period is over, such loans may revert to the bank’s standard variable interest rate, which may not be the lowest interest rate on offer in Australia.  Introductory loans also may have expensive break fees attached, which will make the loan more expensive overall if you decide to refinance before the end of the fixed term. 

What is a standard variable interest rate?

A lender’s standard variable interest rate is the official interest rate the lender advertises before any discounts are applied.  In reality, however, most variable loans offered by lenders include a discount on their standard variable rate. 

Introductory loans are designed to attract new customers in the hope they’ll remain with that lender when the interest rate reverts to a higher rate.  The problem is that revert rates are sometimes offered without standard discounts, so they end up being more expensive in the long run.  You can use our cost of buying a house calculator to see how this works in real life.

For example, on a $450,000, 30-year loan with an introductory interest rate of 2.2% for two years and standard variable rate of 3.5%, the interest payable would be $263,555 (with the introductory loan rate for two years) or $277,452 (without the introductory rate).

Compare this to a variable rate loan which offers a 1.64% discount for the life of the loan.  If the standard variable interest rate of the lender is 3.5%, this means the loan would have an interest rate of just 1.86%, meaning the interest payable would only be $139,912. This is an overall saving of $123,643 in interest payments compared to the variable rate loan calculated over the 30-year life of the loan.

Pros and cons of introductory rate loans

PROS

Very low interest rate at the start of the loan

Many lenders offer an introductory interest rate a full 1% or more below their standard variable interest rate before the loan reverts to a standard variable interest rate. They can offer some of the lowest interest rates in Australia.

Temporary relief during first expensive months

First homebuyers are attracted by the temporary relief from high mortgage repayments in the first few months of their loan when they have expenses such as buying furniture and setting up their new home.

Fee-free, no ongoing fees or cashback offers are tempting

No application or ongoing fees and cashback offers are a great temptation to first homebuyers needing to save every cent they can during an expensive period of their lives.

CONS

The revert rate can be higher than a regular loan

As seen in the example above, the rate that an introductory loan reverts to can be higher than the standard variable rate and can also be higher than a fixed rate loan, which could have a longer fixed period of four to five years instead of one to two.

Refinancing could incur expensive break fees

Borrowers wanting to take advantage of the initial low interest rate and then refinance could find themselves facing costly loan exit fees if they try to switch before the end of the fixed rate period.

Increased loan repayments can come as a shock

When an introductory loan eventually reverts to a standard variable rate, first homebuyers can find the increased repayments to be a shock, especially if they haven’t budgeted for the increase.

More of your frequently asked questions about introductory rate loans

Are honeymoon loans only available to first homebuyers?

No – any type of borrower can apply for an introductory loan.  This type of loan is also popular with property investors wanting low mortgage repayments during property renovations when there’s no rental income.

How long does the introductory period usually last?

The most common introductory period is one to two years, although there are loans which have longer introductory periods of up to five years. Fixed loans over this duration are rare.

Can I extend the introductory rate period when it's nearly over?

No – you can’t extend your existing fixed-rate period because you’ve already agreed to the fixed term.  However, you can ask your existing lender to refinance your loan to another which has a longer fixed interest rate or switch lenders to get a better, more flexible loan deal.

Am I better off getting a fixed rate loan?

You may be, depending on the fixed interest rates being offered by that particular lender.  It’s worth comparing home loans with Savvy to make sure you get the cheapest loan possible.

What is a guaranteed variable rate?

A guaranteed variable rate is one where you’re guaranteed a percentage reduction to the lender’s advertised standard variable rate for the life of the loan.  This means if interest rates rise, your loan rate will rise too, but it will always stay below the lender’s variable rate by the guaranteed fixed percentage. 

For example, if the lender’s variable rate is 3%, and you’re offered a guaranteed 0.3% reduction, your loan rate would be 2.7%.  If the variable interest rate rises to 3.5%, your loan rate would rise to 3.2%.

Can I pay off a significant portion of my home loan in the introductory rate period?

Probably not, as most fixed rate loans have a cap or ceiling on either the number or dollar value of additional repayments you’re able to make during the fixed rate period.  This cap is often set at $10,000 per year or one annual additional repayment. If you wish to make multiple additional repayments to pay your loan off faster, you may need to refinance to a more flexible loan.

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