Honeymoon discount is a home loan that starts off at a discounted rate for the first year. During that period, the discount is typically between 1.5 to 2 percentage points off the standard variable rate (SVR), depending on the lender. This is usually enticing for couples that are first homebuyers. It’s a risk however for the lender if the borrower then decides to refinance after the first year discounted rate, because they will usually make a loss on the loan in these cases.

To avoid losing money, the lender imposes an early exit fee that can range from $400 to a certain percentage of the original loan amount. Sometimes borrowers tend to still go for refinancing when the exit fees are low. If the interest saving to had from the new rate is greater than the refinancing cost, including the exit fee, it may be worth it for the borrower to refinance.