What defines a discount mortgage?

What defines a discount mortgage?

• A. A fixed-rate mortgage for a set term
• B. A mortgage with a set discount off the standard variable rate
• C. A mortgage that exceeds the average interest rate
• D. A mortgage without any rate fluctuations

Answer: (B)

A discount mortgage is defined as a mortgage that offers a set discount off the standard variable rate. This means that the borrower pays a lower interest rate than the typical variable rate for a specific period or throughout the life of the loan, depending on the terms of the mortgage. This arrangement provides financial relief to the borrower during the discount period, making their monthly payments more manageable. In contrast, a fixed-rate mortgage for a set term provides stability with consistent payments but does not necessarily offer a discount off the standard rate. Similarly, a mortgage exceeding the average interest rate would not qualify as a discount mortgage, as it implies higher costs rather than a reduction. Lastly, a mortgage without any rate fluctuations might be a fixed-rate mortgage, but it would not inherently include a discount off the variable rate, which is a critical defining element of a discount mortgage. Thus, the distinction lies in the structured reduction of the interest rate relative to prevailing standard rates.

A discount mortgage is defined as a mortgage that offers a set discount off the standard variable rate. This means that the borrower pays a lower interest rate than the typical variable rate for a specific period or throughout the life of the loan, depending on the terms of the mortgage. This arrangement provides financial relief to the borrower during the discount period, making their monthly payments more manageable.

In contrast, a fixed-rate mortgage for a set term provides stability with consistent payments but does not necessarily offer a discount off the standard rate. Similarly, a mortgage exceeding the average interest rate would not qualify as a discount mortgage, as it implies higher costs rather than a reduction. Lastly, a mortgage without any rate fluctuations might be a fixed-rate mortgage, but it would not inherently include a discount off the variable rate, which is a critical defining element of a discount mortgage. Thus, the distinction lies in the structured reduction of the interest rate relative to prevailing standard rates.