Board Topic: Discount Mortgages
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Discount Mortgages

Posted by: htodman Oct 29 2004, 01:20 PM
My local Sunday paper is full of ads for Discount Mortgages; 1, 3, 5, 7, and 10 year interest only. How do they work?

Posted by: loanuniverse Oct 29 2004, 02:03 PM
I think the "discount mortgages" term refers to a variable rate mortgage that gives you a break in the rate during a certain period "the discount period"

Two things I do not like:

- Variable interest. Not the right time to be getting into a variable interest rate deal right now {in my opinion}.

- Not sure if there is any amortization in the discount period, but if it is interest only, then I don't like that either.

Posted by: htodman Oct 29 2004, 02:46 PM
I think I understand your dislike for the adjustable rate, especially now, however, what is your concern with interest only?

Posted by: loanuniverse Oct 29 2004, 03:00 PM
My concern with interest only is that without amortization a small decrease in the value of real estate could end up wiping out your equity. I guess the lender in me figures that once you are upside down, walking away will be easier.

I know amortization is minimal during the first few years, but according to you there are mortgages with a 10-year "discount period".

My opinion = too much... If you still need a discount period ten years from now, you are buying too much house.

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