DISCOUNTED RATES EXPLAINED
A discount mortgage is a Standard Variable Rate (SVR) with an agreed discount for a set period of time, usually 2 years, three or five years.
By way of example, if a lender when you intially take out a Discount mortage, the lenders SVR is 4% and you have a 1.5% discount...
SVR 4% - Discount 1.5% = Discounted rate 2.5%
At the end of the agreed discount term, your mortgage will automatically revert to the lenders SVR.
IS A DISCOUNT MORTGAGE RIGHT FOR YOU?
Discount rates can often be the cheapest available, but they are generally high risk due to the lender determining the changeable rate, meaning your monthly repayment may fluctuate up or down so it's important to determine wheter or not you can afford a potential increase to your monthly repayment.
If you cannot afford the risk of rate increases, or the benefits in terms of costs compared to fixed-rate is not significant, they are generally a poor choice.
DON'T FORGET TO SWITCH
As with all products that change back to a higher rate at the end of the deal, you can arrange to switch to a new deal just before the end of the discount term, either with the current lender or by re-mortgaging to a different one.
At Top House Mortgages we can talk you through all the mortgage options to you, based on your own unique circumstances.