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| Is a discount mortgage the right product?
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By:
Chris Clare
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| There are many types of mortgage on the market available for all types of people and their circumstances. It can be very difficult for any buyer to make the right choice as to which one is best for them. Even if you are looking to buy for the first time or even you are a seasoned homeowner looking for a step up on the mortgage ladder the various lending institutions have many different types of deals available to match your circumstances. One very common of these mortgages is the discounted rate mortgage. This type of mortgage is where the mortgage rate is reduced from the variable rate for a set period of time for example 1 to 3 years. The choice of period is the buyers but the longer the reduction is for the lower the reduction will be. So for a set period of time the mortgagee ie you will get a reduction in your interest rate for a set period of time and as such will pay less in mortgage payments than you would do on a variable rate deal. However once this discount period actually ends your mortgage will revert back to the rate that the lender has as their standard variable rate. One of the problems with discounted deals is that if the interest rates rise your discounted rate will also rise at the same rate, as it is only a discount on the standard variable rate, so if that changes so do you. Re-mortgaging after the discounted period has ended is always a good option, but should always remember that some lenders do charge early repayment fees if mortgages are ended early that however not many lenders charge fees once the discount period has ended but is worth checking before you sign up for the deal in the first place. The main reason to refinance is to possible get another discounted deal for another set period of time and therefore save a bit more money. Discount rate mortgages are very popular amongst young homeowners, since they are able to keep mortgage payments and interest fees low for the first couple of years, which as anyone who has got onto the property ladder for the first time will testify the more money they can save the better. The only problem is that many see themselves being able to afford a higher mortgage payment after the discount period has ended, and this does not always happen. A lot of people who have arranged a discount rate mortgage find that they are in financial difficulties in the future as a result of not be able to pay the mortgage once the discount has finished and the mortgage has returned to the standard variable rate. These people can also find a re-mortgage is also difficult as rates may have increased and any deal on offer at that time may also be more than they can afford. A discount mortgage can be a great mortgage for those just starting on the housing ladder and therefore needing the extra money that this kind of deal can release. It should be noted that regardless of the deal being cheap at the beginning the borrower would also consider that they can actually afford the debt when the deal ends. If you are arranging any type of mortgage you should always think about what the mortgage payment could be over time and make sure that you can still afford any potential mortgage payments in time to come. Just planning on being in a better position in a few years is financially very risky and can end up with you having your home repossessed. It is always important to save money and saving money at the beginning of any mortgage can never be far from anyones list of requirements. That said it is always important to take a long hard look at discount mortgages and particular the pitfalls of such a deal such as the variable rate and the time when the discount actually ends. This always means that getting a good mortgage broker is always the best advice so make sure you have one to hand when making this vital decision. For the best advice on discount rate mortgages why not try Mortgage Route, helpful mortgage advisors online.www.mortgageroute.co.uk
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