The interest rate offered at the beginning of a mortgage may not remain subject to the same terms until maturity. Some products have discounts that apply for a limited period.
Reference rate, spread, and discount
Depending on the product, the effective rate can be understood as reference rate + spread − discount. The reference rate is not necessarily the central bank's policy rate. Whether a spread can change or be recalculated depends on the loan agreement.
When a transaction-based discount ends
Some lenders offer a rate reduction for card spending, payroll deposits, or automatic transfers. Losing a discount because a transaction condition is unmet is different from the originally agreed discount period ending.
The Korea Housing Finance Corporation's official Didimdol loan guidance includes examples of certain discounts that apply for five years after loan execution. This illustrates the existence of time-limited benefits; it does not imply that all mortgages have these terms.
A hypothetical calculation
| Component | During discount | After expiry |
|---|---|---|
| Reference rate | 3.0% | 3.0% |
| Spread | +1.5pp | +1.5pp |
| Discount | −0.8pp | 0pp |
| Effective rate | 3.7% | 4.5% |
These figures are illustrative, not actual loan quotes or forecasts. Even if the reference rate stays the same, the end of a discount can increase the payable rate.
What to check in the agreement
Read the reference index and reset frequency, any provisions changing the spread, transaction requirements, the discount expiry date, and the formula applicable afterwards.
The initial quoted rate does not determine the entire cost of a long-term mortgage.
This is general information. The individual loan agreement and product disclosure govern actual terms.
Related readingWhere Did Five Years of Mortgage Rate Discounts Go?My experience meeting card, payroll and automatic-transfer requirements for five years before the discount period ended.