Rising prices of fixed-rate mortgages mean cheaper discounted mortgages now have a place in the spotlight. But there are some things to consider before signing up. Scott Barron of SJ Mortgages explains the pros and cons to one of our readers in this week’s Q&A
The Question
I’m remortgaging in December and looking at my options now. I’m worried about the finances as it looks like repayments are going to be around £200 more per month. Someone mentioned a discounted mortgage. What is this and could it be an option for me?
Scott’s Answer
Looking into your mortgage options now is a smart move, understanding what your mortgage payment could be well in advance is important.
A discounted product is a type of variable rate mortgage, the lender offers you a discount on its Standard Variable Rate (SVR). It typically runs for two-years but there are lenders which offer this for longer periods.
Like with most mortgage products, once this initial period ends you will revert to the lender’s SVR. Currently discounted mortgage products are generally cheaper than an equivalent fixed rate product – that is why people are talking about this type of mortgage more than they might have done previously.
The biggest consideration you should factor into your decision around taking a discounted product is the fact that the rate could change during the time that you have it. The rate that you pay could go down, but more importantly is that it could increase.
There isn’t normally a cap to how high the interest rate could go, therefore having a discounted product makes budgeting more difficult.
Should interest rates fluctuate, your payments could be different one month to the next and it could work out costing you more if rates increase by more than you could have paid on a fixed rate.
[box style=”4″]
Meet our experts Scott Barron and Jack Tutton
Scott and Jack are co-founders of SJ Mortgages. With over 15 years industry experience and after working for large corporations, they decided to set up SJ Mortgages with the aim to provide their clients with expert advice alongside a bespoke service.
Being a totally independent whole-of-market brokerage enables them to be completely customer focused and deliver a great client outcome. Being whole of market means that they work with over 120 mortgage lenders and have access to over 10,000 products.
A mortgage is many people’s biggest financial commitment; in the current difficult mortgage market Scott and Jack are here to help you navigate the process and get you the best possible result.
Please click this link to their website to find more information, access to a calculator, blogs and to get in touch with SJ Mortgages.
[/box]
