Contact a Mortgage Broker Today
A discount mortgage has a variable interest rate that will move roughly in line with the lenderís Standard Variable Rate (SVR). The discount from the SVR is genuine and will normally apply for a set period of between one to five years. Once the discount period expires the interest rate will convert to the lenderís SVR.
Because the discount rate is variable, any change in the SVR will affect the interest rate attached to the mortgage and therefore the amount of monthly repayments due. The lenderís SVR will normally reflect changes to the Bank of England Base Rate (BoEBR), although this is not a requirement.
Discount mortgages are popular with first-time-buyers who cannot afford high mortgage repayments during the early years of homeownership.
Despite this advantage, there are several disadvantages to consider. Discount mortgages often come with stringent terms and conditions, including long tie-in periods and costly early repayment charges. Borrowers should therefore look beyond the discounted interest rate period when assessing whether to apply for such a mortgage.
Please contact us today for more information on discount rate mortgage products.