UK Flexible Mortgages - Mortgage Advice

What are flexible Mortgages?

Used properly and understood fully, a flexible mortgage could save you thousands of pounds over the life of your mortgage.

Generally, people change their mortgage deal once every five or six years. Otherwise, they may change it once they get to the end of a discounted or fixed period. Chances are in that time the mortgage market has changed a great deal. For instance, in May 1991, the base rate was 11.5%, but today they stand at 4.0%.

In addition, the market is a great deal more competitive. Remortgaging has increased massively because borrowers began to realise that they could change their lender if they wanted to. However, the most prominent addition in recent years to the mortgage market is the flexible mortgage.

The flexible mortgage came over from Australia in 1995. Since then, every mainstream lender has included it in the range of deals. At first, the big players ignored flexible mortgages, but having seen their success they jumped on the bandwagon. Now, 22% of gross lending is taken up by flexible mortgages.

The flexible mortgage puts the control back in the borrower's hands. It can be adapted to suit your circumstances and allows your money to work harder for you.

So many companies call their products flexible that it can be difficult to discern which are truly flexible mortgages and which merely have flexible features. To help, these six criteria should be met to call it a truly flexible mortgage.

The most important benefit of a flexible mortgage, and the one that will save you the most money over the course of your loan is the ability to overpay. You should be able to overpay at any time, and any amount, and by lump sum or regularly. This helps to reduce the total interest owing, and you can pay the loan off early.

Interest should be calculated daily. Thus you get the overpayment's benefit immediately rather than waiting for a year should interest be calculated annually.

A truly flexible mortgage allows you to underpay should you need to, usually after you have overpaid enough to cover the difference between your normal payment and your underpayments.

You should be able to take a payment holiday, maybe for a couple of months or over Christmas. Again, you will probably need to have overpaid first to cover this.

A flexible mortgages should not have redemption fees at any time, so you are free to pay off large chunks of your mortgage or move on without penalty.

Finally, you should be able to borrow back money that you have overpaid should you need to.

Flexible mortgage are particularly useful for the self-employed or people with uneven income. You can overpay when you get unexpectedly high income, and underpay when you are struggling.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

© AskFinancially.com 2009

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