What are discounted mortgages? These are mortgage schemes where an initial period of the term is charged at a lower or discounted rate of interest. Usually that is set at a % below the lenders standard variable rate or sometimes a discounted rate based on the Bank of England Base Rate.
Why should you look at discounted deals? Quite simply the initial discounted period will mean you pay less interest on your borrowing. That could allow you to use the money for something else or perhaps give you some breathing space while you get over the expense of moving house. More and more we are seeing these types of mortgages becoming the norm as fewer people need to stay on SVR mortgages.
Why do mortgage rates vary for different people - The primary concern of any lender is that the money they lend will be repaid and hence they make a series of checks into an individuals credit history before agreeing to a mortgage. Mortgages are different fom many other forms of lending because when the mortgage is arranged a charge is placed on the property which in effect allows the property to act as a guarantee for the money you have borrowed. Should you fail to repay your mortgage under the terms of the agreement, the lender will have recourse to use someor all of the value of the property to recover their money. In the worst case this could mean they will repossess a property and dispose of it to raise the funds required.
What about SVRs? Competition on the high street for new mortgage customers is very intense and every mortgage company wants their deals to look better than anyone elses. Because of this mortages seem to be getting more and more complicated. So a simple variable rate mortgage is not a common site these days - but if you find a lender with an attractive SVR and no restrictive penalty clauses then there is nothing wrong with this type of deal.
Redemption panalties - what are they? Because so many mortgages offer initial discounts on interest rates the companies don't start making any profit on these deals until later into the term - hence they need you to keep your mortgage with them for a few years at least - they'll try to make sure you do this by imposing penalty charges if you leave before an agreed period of time or by just including a hefty mortgage termination charge.
Should I work with a broker? As the market gets more and more complicated the case for working with a broker becomes easier to justify. A broker needs to be regulated just like any mortgage company and they will make sure you understand clearly what they are going to do for you before you start. Your broker may give you advice on which mortgage is best for you or you may ask them just to give you information. When making sure that the discounted mortgage you like really is a good deal, the help of an experienced broker can be invaluable.