Discounted loan

Guest

Hi!

can you pls tell me something about discounted loans?

Samantha · Posted: Sat Oct 08, 2005 12:10 am Post subject: RE:

Hi Robert

Discounted loans or discount rate mortgages are home loans in which the lenders offer a rate below the standard variable rate for a certain length of time. Most discounted loans are available for 2 to 3 years, although long term loans are also available. There are also discounted loans in which the rate decreases in 2 to 3 stages. A greater discount applies for a shorter loan term.

For example, if a lender offers you a variable rate of 5%, he may provide you with a discount of 1% on the rate thereby allowing you to pay off the loan at 4% interest rate. In case the variable rate falls, the discount rate on your mortgage will also be reduced.

Hope we have been able to help you.

Regards,
Samantha.

Guest

Hi,

Discounted mortgage are particularly attractive when the interest rate are moving downward. And when they move upwards sharply a fixed rate mortgage is preferable. You should also watch out for heavy redemption penalties.

Discounted mortgage has a reduced rate at the start which is fixed for a set period of time. After the initial period of the loan the rate will rise and your repayments will also increase. Lenders make sure that you don't switch mortgages after the discounted period ends, by charging a repayment penalty of 3-4 months interest if you repay your mortgage during the discounted period or within a certain period after the discounted period ends.

Thanks,
Jerry

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