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The Discount Mortgage Loan

Discount mortgages over the last few years have shown to be very popular in the UK for re-mortgages and property purchases as interest rates have generally been quite low and stable. Though past indications cannot guarantee future trends.

They work by having for a period of time the "discount period" a set percentage discounted from the standard variable rate or the bank base rate normally off their standard variable rate or bank base rate. So if the bank of England base rate rise or fall lenders will usually adjust their mortgage rateHealth Fitness Articles, however the agreed discount on the product will apply to the revised rate until the end of the incentivised period. Then the rate will revert to the lenders standard variable rate.

For the discount period early repayment charges usually apply these may apply for the duration of the discount period or they might apply for a period beyond this date. Some discount deals may have steps in them so perhaps for the first year the discount rate will be very attractive then reduce the level of discount each year until the end of the total discount period. Known as a stepped discount. Many lenders for remortgaging offer free legal costs and valuation though there is generally a lender's fee which could be charge up front or added to the home loan on completion.

Discount deals potentially may help you to reduce monthly mortgage payments. Discounted mortgage deals aim to reduce the monthly mortgage payments for a determined period (i.e. the discount period) thus helping clients with their monthly budget. Caution should be taken as rates with this product are not protected from going up.

Though caution should be taken if the borrow is stretched and could not afford a rate rise for example a first time buyer if they decided to move they may find the early repayment charges high and they may be tied into a deal with an uncompetitive interest rate for some time. There can also be a high jump in monthly payments when the discount period ends and reverts back to the lender's higher standard variable rate.

Article Tags: Standard Variable Rate, Discount Period, Standard Variable, Variable Rate, Base Rate

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