Drop Lock Mortgage

Sam · Posted: Thu Jun 03, 2004 4:37 am Post subject: Drop Lock Mortgage

Drop Lock Mortgage is a discount or a tracker mortgage product.It has following characteristics:

It has an option to switch to a fixed rate, at any point within the initial discount period, without paying an early repayment charges.
It provides an ideal way to benefit from base rates when they are low.

For example, Jack has taken a drop lock mortgage of $600,000 at a variable rate of 5% for his house renovation. His initial discount period is until june-2004. Jack wants to switch to a fixed rate of interest of 4% from a variable rate of interest of 5%. By drop lock mortgage he may switch to a fixed rate of interest within the initial discount period. No repayment penalties are charged from him.

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