Flexible Mortgages

What are flexible mortgages?

Flexible mortgages are just that – flexible. They allow you to make over payments, underpayments, lump sum payments, take payment holidays, borrow back over payments, are transportable, calculate interest daily and most don’t charge early repayment charges (ERCs).

Are there different kinds of flexible mortgages?

Current account mortgages and offset mortgages are both types of flexible mortgage. A current account mortgage links your current account with your mortgage account. Interest is calculated on a daily basis so that you benefit by reducing your outstanding debt temporarily every time your salary gets paid into it – i.e. less interest accrues on your mortgage when you have more money in your current account.

Offset mortgages are similar to current account mortgages but they incorporate any savings accounts you have and can also consolidate credit card debt and personal loans along with your mortgage.

A lot of mortgages today though have degrees of flexibility. They might allow you to make over payments of a set amount each month. This could be either a fixed amount of say, up to £500, or a set percentage, say 10% of the outstanding loan.

What are the pros and cons of flexible mortgages?

Pros of flexible mortgages:

By making regular over payments you reduce both the term of your mortgage and the amount of interest you have to pay on it. If you receive bonuses in your job you may welcome the opportunity of being able to make lump sum payments if you want to.

If the need arises you have the ability to make under payments or take payment holidays without going into arrears and getting into trouble with your lender.

You will also be able to make a lump sum withdrawal or borrow back. Some lenders only allow you to borrow back any over payments you have made but others will allow you to borrow back the total amount of your initial loan. This feature can be great if you perhaps want to make home improvements as the rate you pay on your mortgage will be lower than the rate you would get for a personal loan.

Cons of flexible mortgages:

Some of the pros of a flexible mortgage can also be the cons. If you know you have the ability to constantly borrow back money and you are not very disciplined you could end up extending the term of your mortgage or never paying back any capital, or even end up owing more than you did to begin with.

If you would like to find out more about flexible mortgages then speak to a professional mortgage advisor who will help you determine whether it would be a beneficial option for you.