Discount Mortgages - Cheap Mortgage Deals

If you are not on a tight budget then this could be a popular choice. A discount mortgage attracts borrowers who traditionally have the 'buy now pay later' attitude. The lender will offer an initial discount off their standard variable rate which would then reverts to the standard variable rate when the discount period has elapsed. In a period of low interest rates this can have the effect of making a large mortgage look very affordable.

The length of the discounted period varies from under a year to 10 or more years. At some point the discount will come to an end and your payments will increase to a standard rate. A stepped discount rate could be the answer to this which means the increases will occur over a period of time. You may start with a discounted rate of 2% which falls to 1% then to 0.75% over time. They are a good buy for those looking for a cheap initial period when you know your earnings will increase over time.

They often come with penalties or tie in's that will prevent you from either remortgaging or redeeming your loan and approaching another lender. Some lenders will extend the tie in period beyond the introductory deal with an overhang period. This is an early redemption charge that lasts beyond the discount period. They are likely to offer less attractive interest rates to start with.