Discounted Variable Rates
This
is an interest repayment
variation. To tempt new customers most lenders will offer a new borrower a discount
on their standard variable
rate, for a set period.
Your
payments will go up and down, as with a standard variable mortgage, but you're
paying less.
After the agreed set period the interest rate will switch into the mortgage
lender's usual variable rate.
So it may be worth checking what their track record has been for
their variable rate charge because, if they're pricier than most,
they're unlikely to have changed and you may end up as one of the mugs paying
over the odds.
The
rate for new borrowers is usually lower than for existing customers. So try to
shake off that customer inertia and change mortgage lenders
every couple of years - having checked, of course, that there's no penalty
for leaving.
The
penalties
for changing to another mortgage lender may last longer than the agreed discount
term. But they're usually less than for a fixed rate period.
Good
points: You're paying less. Doh!
Bad
points: You're locked in for the agreed term so if the interest base
rate goes up you're stuck. However when the period ends, you can swan along to
the next best discount rate.
The
shorter the term the better. You probably don't want
to tie yourself down for longer than 2 years.
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