 Sam
Site Admin
Joined: 21 May 2005
Posts: 286
Location: CALIFORNIA
120.37 Dollars($)
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 Posted: Thu Jun 03, 2004 12:53 am Post subject: Discount Mortgage |
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Discount Mortgage offers a reduction of a 'given amount' on the lender's standard variable rate. It is an interest rate which is usually set for the period of 1 to 5 years.
Advantages:
- A borrower can make a big saving on the standard variable rate.
- It benefits a borrower by offering a lower interest rate in first few years. He can save money for furnishings, carpets or for whatever else he wants.
- It is used as an incentive to attract potential new borrowers.
Disadvantages:
- A borrower will normally have to pay an application fee when arranging for discount mortgage.
- At the end of the discounted period, borrower's mortgage payments will suddenly increase as the mortgage changes to lender standard variable rate.
- A borrower has to pay early redemption penalties, which may make it expensive for him to remortgage to another rate or lender.
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