Discounted Rate Mortgages
How Discounted Rate Mortgages Work
Discounted rate mortgages offer a temporary reduction on a lender’s standard variable rate. Understanding how these mortgages work can help borrowers decide whether a discounted rate suits their circumstances.
A discounted rate is usually offered for a fixed period, for example a discount of 1.5% from the lender’s standard variable rate for two years. At the end of the discounted period the mortgage normally reverts to the lender’s standard variable rate.
Some discounted rate mortgages use a stepped discount structure, where the level of discount changes during the deal period. For example, a lender may offer a discount of 1.0% in the first year, 1.6% in the second year and 2.1% in the third year from their standard variable rate.
When arranging a discounted rate mortgage, lenders may charge an arrangement fee, which can vary depending on the lender and the specific product. An early repayment charge may also apply if the mortgage is repaid in full, or partially overpaid, during the discounted period.
Advantages and Risks of Discounted Rate Mortgages
Unlike fixed-rate mortgages, discounted rate mortgages allow borrowers to benefit if interest rates fall. However, if interest rates rise, monthly payments may also increase as there is no fixed-rate protection. Borrowers who prefer stable monthly payments may wish to consider fixed rate mortgages instead.
Why Use Mortgage Advice Center?
• Free quotations for discounted rate mortgages
• Mortgage options tailored to your financial circumstances
• Whole-of-market mortgage advice
• Access to a wide range of lenders and mortgage products
• Guidance throughout the mortgage process from enquiry to completion
Book a Free Consultation About Discounted Rate Mortgages
Book a free telephone or office meeting with one of our advisers to discuss discounted rate mortgage options.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
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