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Flexible Mortgages

Nowadays, borrowers require a lot more flexibility when they consider obtaining a mortgage. Bearing this in mind, a lot more mortgage lenders are now offering what they call ‘flexible’ mortgages. However, this term ‘flexible’ could mean many different things. If the borrower is not sure which of the mortgages they look at are flexible as well as what the benefits of these mortgages are, then they should consider the following information before applying for one.

There are a great number of mortgages that state to be flexible; however there are a few things that would define a real flexible mortgage. When deciding whether a mortgage is flexible or not, there are four main pointers the borrower should look for. These points are that the borrower is allowed to overpay with their payments, they are allowed to make smaller payments, they are able to have a payment holiday and the interest charged for the mortgage is calculated on a daily basis.

These points are explained in more detail below.

Overpayments – One of the main features of a flexible mortgage is that the borrower is able to make extra payments against the mortgage. With the more traditional mortgages, the borrower is only able to pay the basic repayment amount each month. However, if they have a flexible mortgage they are able to pay any amount they want to each month. This would obviously mean that in the months where the borrower has extra sums of money, they could repay more money off their mortgage, therefore meaning that they are able to repay their mortgage loan quicker allowing them to pay less interest charges.

Underpayments – This is another great feature of a flexible mortgage. If the borrower is unable to make the full repayment amount in a month, they have the option of being able to pay a smaller amount to what they can afford. They should however try to avoid making too many underpayments as it would take longer to repay the mortgage which would mean paying more interest. Another problem with underpaying the mortgage is that most lenders will charge penalty fees.

Payment holidays – These payment holidays are like underpayments, but they allow the borrower to stop their mortgage payments for a short period of time. Although this sounds good, there are normally restrictions. Mortgage lenders will not generally allow the borrower to have a payment holiday, although if they have overpaid on their mortgage previously then they will consider allowing it. After their payment holiday the borrower will need to make overpayments on their mortgage in order to enable their repayments to be back on schedule. These payment holidays are very useful for those individuals who are self employed or would like to take time off work for their own personal reasons.

Another benefit of a flexible mortgage is that they give the borrower the capability to borrow more money from their mortgage. If they have overpaid on their mortgage in the past and are now looking at borrowing some extra cash for things such as home improvements or purchases, then they will be able to borrow the sum of money back that they have overpaid previously. Although they will be altering their mortgage terms again, obtaining a loan at their mortgage rate would be a lower interest rate than a general personal loan.

Flexible mortgages are planned for those people who want the ability to change their mortgage payments in order to match fluctuations in their cash flow

The interest rate of a flexible mortgage varies and can be a discounted rate, a fixed rate, a capped rate or a variable rate. The interest rates of these mortgages are calculated on a daily or monthly basis instead of the normal annual basis. This would mean that any repayments of the mortgage loan would affect the amount of interest charged on the remaining balance immediately. With the borrower paying regular overpayments, the interest amount they save on their mortgage over its term could be quite substantial.

A flexible Mortgage is sometimes not obtainable to some borrowers. For example, a borrower who has an adverse payment record or those who are on DSS benefits cannot normally obtain a flexible mortgage.