Discounted Rate Mortgages

What Is A Discounted Rate Mortgage?

A discounted rate mortgage is basically a standard variable rate mortgage where the mortgage rate has been discounted to below the standard variable rate. The discounted rate might be for example 2% below the standard variable rate mortgage which would make your monthly mortgage payments lower. As with the standard variable rate mortgage, discounted rate mortgages are variable meaning that your monthly payment could go up or down depending upon the Bank of England base rate.

What Benefits Do Discounted Rate Mortgages Offer?

Discounted rate mortgages allow the flexibility of the mortgage payments going down if the rate is falling, and with them being at a discounted interest rate, they are more appealing than the standard variable rate mortgages.

The discounted period can vary but typically may be 2, 5 or 10 years, so this could mean savings for a good period of time.

Are There Any Pitfalls To Discounted Rate Mortgages?

As with fixed rate mortgages, there could be tie in periods which could result in a redemption fee if you wanted to change your mortgage or pay it within the discounted period. The tie in periods can be extended, so you may find yourself tied to the lender for a period of time after your discounted rate mortgage is complete, for this reason it may be best to shop around to find a discounted rate mortgage deal where there is no or little extended tie in period. This is where ZeroPercentInterest.com may be able to help you.

If you are in any doubt about your mortgage it is always best to consult with an independent financial advisor before committing to the mortgage.