Discount Mortgages

The Discount Mortgages are those wherein initially you would have to pay interest that is below the standard variable rate of the lender. This is set for a specified period of time after which you revert to the standard variable rate. Discount Mortgages are ideal for customers who want to keep their monthly repayments low in the initial few years.

The lenders of Discount Mortgages charge lesser interest than the standard variable rate. For example, if the SVR of the lender is 7% and the Discount is 3%, the interest that you pay is 4%. Most of the lenders allow lower rates for two to three years. There are lenders that lend for an even longer duration. Some lenders have the provision of "steeped discount" wherein the Discount falls in two or three stages.

If you opt for a Discount Mortgage you would benefit in the sense that even if the interest rates rise, the same reduced rate would apply for the duration of the deal. You would be paying much less than those who had borrowed on SVR. In the Discount mortgages, the more the Discount percentage, the lesser is the duration of the Discount. In Discount mortgage, since you pay less for the first few years, you can save some money.

There are a plethora of lenders in the market and you must choose one whose terms and conditions are in agreement with your requirements and your financial situation. It is best to take expert advice before opting for any particular type of Discount Mortgages.