Discounted Rate Mortgages
Discounted rate mortgages are home loans where the interest rate is fixed a set percentage below the lenders standard variable rate for either a set period or for the entirety of your mortgage. The SVR is set by your lender and the interest rate can increase or decrease by any amount and at any time. So, the amount that you have to pay each month can change as the standard variable interest rate will change based on the Bank of England’s base rate and the lender’s own costs.
Discounted variable mortgages involve you saving on the interest that you pay, as you will still be repaying the capital you have borrowed each month. With discount mortgage rates, if your interest rate rises, the monthly mortgage payments would rise but you will be paying more interest rather than repaying more of the capital you have borrowed.
Discounted mortgages are generally offered for a limited time frame which is usually between two and five years. The longer your discounted period is, the amount of discount tends to be smaller. Once the timeframe of your discounted variable rate mortgage comes to an end, your lender will automatically transfer you onto a standard variable rate. After this has taken place your monthly repayments will increase as you will be paying a higher rate of interest. So, when you have reached this point you are usually better off to remortgage to a new deal.
For further advice on discounted rate mortgages, contact us today for guidance from our expert mortgage brokers.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up the repayments on your mortgage.
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