Flexible Mortgages - UK-Money.com

Flexible mortgages explained

Flexible mortgages arrived on the shores of the UK from Australia in 1995. At first many mortgage lenders simply chose to ignore the fact that it existed but as demand grew, products from UK flexible mortgage lenders began to spring up all over the place. It’s hardly surprising when 22% of all gross lending can now be attributed to flexible mortgages!

Flexible mortgages are another type of mortgage to consider if a fixed rate or variable rate really doesn’t float your boat. They are unlike any other mortgages we have discussed and have been called the fashionable mortgage of the decade. The main thing about a flexible mortgage is that you can tailor the mortgage according to your needs at any particular time. Flexible mortgages come in all shapes and sizes and offer a wide variation of benefits. The benefits will differ from lender to lender, but let’s look at a summary of the advantages of taking out a flexible mortgage.

What do UK flexible mortgages enable you to do?

1. Some flexible mortgages are linked to a current account and known as current account mortgages. You simply pay your wages into it every month and the mortgage looks very much like a huge overdraft. You can control all your finances from one place in this instance.

2. Make overpayments, either regular ones or one off lump sums.

3. Reduce the term of your mortgage. By making overpayments you will decrease the amount of time it will take you to pay back your mortgage.

4. If you need a loan, you can simply borrow it back from your mortgage account at much lower APR’s than you receive with personal loans.

5. You can take payment holidays when you need the cash for something else like a well earned holiday.

6. You can also make underpayments for a specified period if you are a little bit strapped for cash at some points.

How is interest on a flexible mortgage calculated?

Interest is calculated on a daily basis so any lump sum repayments or overpayments you make will automatically be taken into consideration. This means the more you pay off as quickly as you can the lower your standard monthly repayments will be.

Are there any disadvantages to a flexible mortgage?

1. As you maintain control of how you want to pay the mortgage back, interest rates for such mortgages are slightly higher.

2. Some standard mortgages will have no early repayment penalties. They will let you pay either a certain amount extra every year or as much as you like without being penalised. As the interest rates are lower, this could prove to be more financially beneficial than a flexible mortgage.

Is a flexible mortgage right for me?

It is said that flexible mortgages are particularly appropriate for the self employed, who never know from month to month how much they will earn. You can make huge overpayments when you have a fantastic month or underpayments when you are struggling a little.

If your main aim is to pay off the mortgage early, you should thoroughly compare all of the benefits of a flexible mortgage with those that standard mortgages that have no early repayment penalties. You should make your decision wisely and choose the one that makes financial sense. Don’t be won over by flexible mortgage benefits that you may not use.

If you feel that you would use all of the feature benefits such as payment holidays, underpayments or loans, or would feel comforted by the fact that such facilities were available to you, then you should seriously consider taking out a flexible mortgage. Just ensure that the interest rate and standard monthly repayments suit your budget.