Discounted Variable Rate Remortgage

Every lender has a standard variable rate to offer. A discounted variable rate remortgage provides the lender with an option to the standard variable rate remortgage. The DVR remortgage has a discounted rate from the lenders SVR remortgage for a set period of time.

The discounted rate increases or decreases with the lenders SVR. In general, the shorter the discount period, the larger the discount.

For example, if the lenders standard variable rate is 6 per cent and they offer a remortgage at a discount of 1.0 per cent for one year, you will start the period by paying 5 per cent. If the lenders SVR increases to 8 per cent after six months, the interest rate will be 7 per cent. If the SVR decreases to 5 per cent after one year, the payment will be at a rate of 4 per cent.

Advantages of a discounted variable rate remortgage are:

-Ability to save off the lenders SVR

-When the lenders SVR decreases your payment decreases

Disadvantages of a discount VR mortgage are:

-When the lenders SVR increases, the rate of the discount VR increases, therefore making payments higher

-The lender can change its SVR at any time, regardless of what the Bank of England’s base rate is doing

-Early repayment charges will likely apply during the entire discount period

-There is typically an arrangement fee

-When the discount period ends, the rate reverts back to the lenders SVR - so there will likely be an increase in payment amount

Discounted VR remortgages work when looking for a more risky remortgage type. Visit a remortgage specialist for valuable advice on this product and several others available.