Thank you for your enquiry for a Discount Variable Rate Mortgage
Each person has unique and individual circumstances and requirements, and our recommendation for your Discount Variable Rate Mortgage will reflect your own personal needs.
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Discount Variable Rate Mortgages are mortgage purchases that are calculated in accordance with a lender’s SVR (Standard Variable Rate). The mortgage lender’s SVR is discounted for a set period and this allows mortgage buyers (especially first time buyers) to save money for a period of time. After this period the interest on the mortgage is gauged on the lender’s SVR and the borrower pays the same rate of interest as anyone else would.
For the initial period of time Discount Variable Rate Mortgages offer good deals on the mortgage interest amount and many mortgage providers offer large percentage discounts compared to their SVR. However, after this period of time has expired many will find that their rates increase to rates that are far above standard mortgage rates. This is the reason many mortgage buyers have it in their agreements that they can switch to another type of mortgage agreement or switch lenders altogether to save on these escalated fees after the discount period has expired. Switching mortgages is a way to save on the higher interest fees that would be incurred if they were to stay with the original mortgage holder.
It should be mentioned that before borrowers switch back to a different mortgage type or they switch lenders altogether they should be aware of the fees and costs of revaluation that may be incurred during this process.
The discounted rates are usually offered for a period of two to three years; however some mortgage lenders are offering three to five year discounts.
Like any other mortgage types, you have your advantages and your disadvantages. Some of the advantages are the fact that you save money on your interest rate for a period of time. Also your mortgage payment will reduce when there is a fall in the SVR.
Some of the disadvantages of a discount variable rate mortgage are the fact that there may be early redemption penalties and fees when switching your mortgage to one with lower interest rates. Another disadvantage is the fact that it costs money to apply (an application fee) for a variable discount rate mortgage. There is also the fact that the mortgage increases to the lender’s SVR when the discount period expires.
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