Discount Rate Mortgage
A Discount Rate Mortgage or Discount Mortgage is a mortgage that follows a lenders SVR (Standard Variable Rate) this will then have a discount amount applied for a set period of time i,e 2, 3 or 5 years.
The rate of interest that you pay may fluctuate during your discounted period due to fluctuations in the lenders SVR (Standard Variable Rate) and this can go up as well as down. your rate will still be discounted by the same amount as it was at the beginning of the discounted term, just deducted from either a higher or lower point depending on the direction of fluctuation.
If you have a £250,000 loan on a 2 year Discount Rate Mortgage at 1.69%, with SVR of 3.99% over 25 years you will pay £1022.00 per month.
Your discount = 3.99% – 1.69% = 2.3%
So if the lenders SVR increases by 0.5 % to 4.49% you will still pay 2.3% less than this = 2.19% This alters your monthly payment to £1083.00
During your initial term which is normally:
- 2 year Discount Rate Mortgage
- 3 year Discount Rate Mortgage
- 5 year Discount Rate Mortgage
The amount you pay below the SVR will not vary you will continue to pay the same for that initial period.
Once this initial period has concluded you will switch to the banks SVR (standard variable rate) which is normally higher, so it is always advisable to contact us for a remortgage at this time 01702 619 221.