Discounted Mortgages
If you need to save money in the first few years of your mortgage then a discounted rate could be the way to go. With this product a discount is taken off the lenders standard variable rate for a period of time. It offers a true saving. This product is beneficial if the interest rates decrease or are likely to. After the discounted period it will revert to the standard variable rate. This discount rate can also rise and fall in accordance with the standard variable rate. Please be aware that once your discount period ends the monthly payments will increase
Discounted rate mortgages give exactly what they say a discount on the lender's Standard Variable Rate (SVR) Mortgage. For example, a mortgage lender may offer a 2% discount on its SVR mortgage for two years. With an SVR of 6%, this would make your mortgage rate 4%.
What does it mean for you?
- It gives you a gentler start to your mortgage, at a time when money may well be tight. But you must be confident you can afford the payments when the discount ends.
- The discount period is limited, so don't get used to those early low repayments.
- You may not be able to make overpayments and pay off the loan early without penalties.
- The lender may not reduce, or may delay reducing their variable rate even if the Bank of England rate goes down.
Early Repayment Charges - During the special deal early repayment charges will apply and they can apply even after the end of the special deal period as well
Again, like fixed rate mortgages, discounted mortgages tend to have penalties should you try and switch mortgage or pay it off within the discounted period, you could be liable for a large early repayment charge. You also need to watch out for extended tie-ins which would prevent you from moving lender within a certain period of time.