Explained how a discount mortgage works
A discounted interest rate mortgage explained
The discount mortgage simply offers a discount off the lender's
standard rate for a given period and is designed to attract new mortgage
business in the same way as a fixed rate
product. some discount mortgages offer what is known as a stepped
discount rate mortgage. e.g. 1% in the first year, 1.5% in the second and
2% in the third. This is designed to give further encouragement to the
borrower not to move his mortgage elsewhere.
Discount mortgage rate - where there is reduction in the standard
variable rate (e.g. a 2% discount) for a set period; typically 1 to 5 years.
Sometimes the rate is stepped. A genuine discount off the variable rate, eg 2% discount for three years.
There may be a restriction on how soon the discount mortgage can
be repaid, or a penalty for repaying within a certain period. As with the
fixed rate mortgage, there are certain things to consider when thinking about a
discounted rate mortgage.
- An arrangement fee may be payable.
- An early redemption charge may be payable.
- There is no protection against increases in the lenders standard
variable rate.
For a discount mortgage enquiry please contact
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