Discount Mortgages

A discounted mortgage is a mortgage that the lender has designed with a discount off their standard variable rate (SVR) for a limited period.

For arguments sake, suppose the lenders SVR is 7%. They then offer you a discount of 1.5% on this. The initial pay rate would therefore be 5.5%. The amount that you actually pay in mortgage repayments is not fixed, of course, for the if the lender's variable rate rose to say, 9%, then the rate payable would rise to 7.5%, thus increasing the actual amount that you would pay each month. You cannot, therefore, be absolutely sure of your mortgage repayments as you can be, say, with a fixed rate mortgage. Mind you, should the lenders standard variable rate (SVR) decrease, you will benefit from the lower payments.

Booking and/or arrangement fees and early repayment charges often apply to discounted mortgages.

As with any mortgage decision, you should seek expert advice about discounted mortgages and their terms.

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