Discounted Interest Rate Mortgage

The discount mortgage rate is another variation of the standard variable rate. It provides a discount from the lenders SVR for a fixed period of time agreed between borrower and lender. Quite often the larger the deposit you provide the larger the discount will be. The same rule sometimes applies if the property price is very high.

The interest rate still fluctuates, meaning your monthly repayments may differ slightly from month to month, but the discount remains constant. A discount rate mortgage is an incentive scheme used by mortgage lenders to attract new customers. Some discounted rate mortgages also include an element of cash back.

A discount rate mortgage might be most beneficial to first time buyers as the savings made in the early years of the mortgage could be used to furnish the house.

However, once again early and overhanging redemption penalties almost always apply so its worth finding out the lenders SVR as well so you know how much you'll be paying once the discount period ends. You may also be charged an arrangement fee.

For meanings of terms please refer to glossary