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Discounted Mortgages
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The discount periods for Discounted Mortgages typically range from six month to around five years. As a guide, the shorter the discounted period the greater the discount you should expect and vice versa. E.g. for a discounted period of two years, the mortgage lender may give you a discount of 1% against their standard variable rate whereas a one year discount may be 2%.
Discounted Mortgage can sometimes also have their interest rate fixed. Then, whilst the lenders standard variable rate can move up and down in response to interest rate changes in the money markets, and particularly the Bank of England’s Base Rate, the discounted rate will stay the fixed until the mortgages’ discount period has ended.
With Discounted Mortgages, at the end of the discounted period, the interest rate usually reverts to the lenders standard variable rate.
Discounted Mortgages are particularly helpful for borrowers who need to keep their initial payments as low as possible. Perhaps they’ve chosen a Discounted Mortgage because it’s their first mortgage and money is a little tight. Perhaps they simply wish to have some spare in their monthly budget to go towards furnishing their new home or even on car repayments.
Discounted Mortgages are also good for re-mortgaging. (A re-mortgage is when you change your mortgage lender within your mortgage term.) You can then consider swapping mortgage lenders again at the end of the discounted period. This way you would enjoy the lower, discounted rates each time you swap lenders. However, if you stick with the lender you will revert to the standard variable rate for your chosen lender.
So why isn’t everyone on a Discounted Mortgage? Well, the primary disadvantage of Discounted Mortgages is that they invariably have early redemption penalties if the mortgage is repaid within the discounted period. There may also be some set up charges. Nevertheless, they are very tempting.
If a Discount Mortgage tempts you you are well advised to talk to a professional mortgage broker. If you ask for a quote now we will organise for one to phone you with the next 24 hours.Mortgages