An introductory or honeymoon rate loan offers a low interest rate for an initial period of time. After the initial period has finished the loan will revert to the standard variable rate unless you have negotiated something different with your lender.The rate can be fixed, variable or capped.
Advantages:
- Usually the lowest rates on the market.
- By making extra payments during the initial period, borrowers can substantially reduce the principal.
Disadvantages:
- Payments will increase after initial period.
- Most lenders charge penalties if you discharge the loan within the first 3-4 years.