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.

A very commonplace mortgage is the discount mortgage. Put simply this is a mortgage that has a rate that is a discount from the lenders standard variable rate and this discount normally runs for a set period of time such as one to three years. The discount rate and term of the that rate tend to influence each other so the longer the term of the discount the higher the actual rate will be but the opposite is also the case the shorter the discount period the lower the actual rate will be and therefore the lower the payments will be.

Put simply the borrower is getting a reduction in their rate and therefore their payments for a set period of time and as such they will save money against the standard variable rate. That said once the discount period ends the mortgage will revert back to the lenders standard variable rate. One of the drawbacks is that due to the fact that the mortgage is a discount from the variable rate if mortgage rates do rise then the discounted mortgage will also rise at the same rate. However the same is said if the mortgage rates drop the discounted mortgage will also fall.

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.

When applying for a discounted rate mortgage, it is always important to know how much the mortgage payment will be after the introductory period has ended, and be able to afford the higher payments right off the bat. Hoping that you will get a raise or better job once the discount period has ended is not enough when applying for a discounted rate mortgage, because if you cannot afford the higher payments you can lose your home. Discounted rate mortgages are a great option for many looking to buy a home, but it is not the best option for everybody.

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.

About the Author, Chris Clare:

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