What is a discount rate mortgage?
Discount rate mortgages are paid at a reduced amount to the individual lender’s standard variable rate (SVR). This is a short-term deal, usually fixed for about two years or more depending on which lender you choose.
Pros and cons of discount mortgages
As one of the cheapest mortgages you can get, discount mortgages are popular. However, the rate paid is linked to the lender’s standard variable rate. This means as the SVR changes, so will the rate you have to pay, whether more or less. It’s therefore only wise to choose this option if you’re attracted to the low interest rate, but can afford to repay higher amounts should the SVR increase. It’s also wise to read all the marketing material carefully to ensure the terms are clear.
When coming to the end of an introductory rate, homeowners will usually be switched to a variable rate mortgage in line with the lender’s SVR. If you think you can get a better deal elsewhere, you make like to consider remortgaging. Shop around to find the best deal, and get advice if you think you can get more for your money.
When looking to apply for any type of mortgage, getting professional, impartial advice can help you get the best mortgage product for you. Find a trusted mortgage adviser in your local area here.