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UK Mortgage Types

Discounted rate mortgages — more information

There are basically two kinds of underlying mortgage arrangement to any contract:

1. Interest only
2. Principal and interest

Compare UK discounted rate mortgage interest rates online

This page is designed to give the "pros and cons" of the discount rate mortgages . If you want to compare your mortgage, or look at the possibilities for a new mortgage on discounted interest, click here:

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Discount rate interest arrangements are an interest repayment variation on a basic "principal and interest" approach.

Basically, the discount is to win new customers. Interest will follow the market up and down, as with a variable rate loan, but the repayments will be less.

After an agreed period the rate will revert to the lender's normal rate.

And guess what? The lender's normal rate will be organised, very carefully to get back at least as much as, and often more than, would have been the case with a no frills, variable rate loan.

Pros: Initial repayments are less.

Cons: Most discount contracts have no let out for the discount period, so you're stuck with their deal for at least that long.

Don't tie yourself down to variable rate mortgages for more than two years or so, and, as the lender is willing to make old customers pay for new ones, every two years go to a new lender, and be a new customer!

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