A discount mortgage is a mortgage that the lender has designed, in order to better attract you to their product. This entails a special time limited reduction, or discount, on their Standard Variable Rate (SVR).

For arguments sake, suppose the lenders SVR is 5%. They then offer you a discount of 1.5% on this. The initial pay rate would therefore be 3.5%. The amount that you actually pay in mortgage repayments is not fixed, of course, for the if the lender's variable rate rose to say, 6%, then the rate payable would rise to 4.5%, thus increasing the actual amount that you would pay each month. You cannot, therefore, be absolutely sure of your mortgage repayments as you can be, say, with a fixed rate mortgage. Mind you, should the lenders standard variable rate (SVR) decrease, you will benefit from the lower payments.

It is still possible to have up-front charges for discounted products and an early redemption fee is common. In particular, with some discount mortgages, you also need to beware of what is termed - 'payment shock'. Some (usually) short term discount products offer a 'big discount, perhaps in the region of 4% off for 1 year maybe. At the end of such a short discount period, you will be facing a significant increase in your monthly mortgage payment when the lender switches you to their SVR. If the mortgage has a tie-in period that extends beyond the discount period, you may not be able to remortgage to a better deal without incurring significant financial penalty.

As with any mortgage decision, it pays to seek expert advice about discount mortgages and their terms. You can take the opportunity right now whilst you are online, to request a mortgage adviser to contact you at your convenience regarding which mortgages you could apply for right now. Just click on the Advice link below.

For advice as to whether a discount mortgage is the right choice for you, please click this link.