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Discount Rate Mortgage
Mortgage lenders generally offer an initial discount off their variable rate mortgage. Usually, the discounted rate only applies for the first year and then it reverts to the standard variable rate.
For the discounted period, you'll have more money in your pocket, which is useful for those extra costs you'll incur when you a buy a home, such as decorating and buying furniture.
PROS of a discount rate mortgage:
- Cheap initial rate
- Payments are low at first
CONS of a discount rate mortgage:
- You'll revert to the higher standard variable rate at the end of the discounted period.
Who does a discount rate mortgage suit?
- Discounted rate mortgages are most suitable for people who are looking for the cheapest initial rate, but who can afford the increased payment after the initial period.
- If you believe that rates will stay the same, or fall over the next year, all other things being equal, a 12 month discount rate is probably a better option than a 12 month fixed rate, as you would benefit from interest rate drops in the mean time.
Alternatives mortgage rates to consider
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