Article Kingdom. Free articles
Search:

Home | Finance | Mortgages


Is a discount mortgage the correct product for me?

By: Chris Clare

There are a lot of mortgages on the market and it can be an extremely difficult choice deciding which one is exactly right for you and your financial circumstances. Every single lender has many many different types of mortgage deals designed to suit every type of client so regardless of what type of mortgage client you are most lenders have a product to suit.

One type of mortgage that is offered to those looking to purchase their first home is a discount rate mortgage, where borrowers are offered a reduced interest rate on their loan for a set period of time. The interest rate typically stays reduced for a period of about one to three years, depending greatly on what the borrower would like to do.

Borrowers are getting a discount from this type of mortgage by paying low interest fees during their initial period, but will save more money overall when the discounted period is short. Once the discounted period ends, the borrower will have to pay the standard variable rate that is offered by the lender. With a variable rate mortgage, interest rates can frequently change and can cause monthly mortgage payments to increase or even decrease each month.

It is always an option to refinance in the future as quite a lot of people do. But you should consider any fees your lender may charge you to leave such as penalties on ending the mortgage early. That said if you have gone through the discount period in full you should be OK as not many lenders charge beyond their rate periods, but it is always important to check your products terms and conditions before you sign up to ensure you don't have this sort of unacceptable tie-in. A lot of people do re-mortgage to get a further reduction in rate once their original reduction has ended and therefore benefit from a further reduction in costs.

Mortgages that carry a discount are extremely popular with the first time buyer as it means they can save as much money as they can, which can be quite important when you are first starting out. The only drawback to this is many can be led into a mortgage that they may find unaffordable in the future due to the artificial way that the costs have been reduced in the early years.

Many individuals who have taken advantage of the benefits that discounted rate mortgages have to offer find themselves in financial hardship, due to the inability to pay higher mortgage payments after the discount period has ended. Refinancing to a better rate mortgage can also be difficult as rates do change and a discounted rate in the future might not be as beneficial as it was in the past. All this is assuming that the current mortgage has been conducted satisfactory as any poor mortgage history makes re-mortgaging even harder than it could be.

Discount mortgages are good for people getting on the property ladder and as such having a greater need for cash in the early years. That said even though the mortgage might be cheap at the beginning the mortgage will rise in the future and anyone not considering this is taking an enormous risk with their future.

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.

Saving money during the first couple of years seems like the best idea in the world, but the potential higher interest fees and mortgage payments must be considered before applying for this type of loan. The best thing that any potential mortgagee should do before making any decision is to speak to their independent financial advisor.

Article Source: http://article-kingdom.co.uk

For the best help and information on discount rate mortgages come and visit Mortgage Route, helpful mortgage help and information online.

Please Rate this Article

 

Not yet Rated

Click the XML Icon Above to Receive Mortgages Articles Via RSS!
Additional Articles From - Home | Finance | Mortgages
Sign Up for a free account or learn more.
Submit Articles
Member Login
Top Authors
Most Popular Articles
Submission Guidelines
Article RSS Feeds
About Us
Link to Us
Contact Us
Privacy Policy
Terms of Service
Sponsors
Find Local Vehicles

Online CRM Solution

Powered by Article Dashboard