With the vast number of mortgage plans available on the market, it can be tricky to pick the right one.
One of the most popular options is a flexible mortgage.
But, what is a flexible mortgage and what exactly does it offer?
Keep on reading to find out.
A flexible mortgage is a customised version of a standard mortgage that gives borrowers better control over their payments. They usually come with different features, which makes them “flexible,” and vary depending on the type of loan.
In most cases, borrowers can choose how to repay their mortgage, how much they pay monthly, pay off the flexible mortgage with no early repayment charges, and even take back their cash.
Since flexible loans are customisable, lenders have the freedom to include or remove some special features that often accompany these types of mortgages.
Some of the most common features include:
Most lenders give borrowers the option to pay more than the initial monthly payment by increasing the regular payment or through a lump sum. Upping the monthly payment is optional and borrowers can always reduce it to the initial amount.
In certain circumstances, lenders sometimes allow borrowers to pay less than the monthly payment they initially agreed upon. They are more likely to let you underpay if you’ve overpaid and are ahead of the original payment plan.
Calculating interest on a daily basis is not only practical for the lender but can save the borrower some cash, especially when the standard variable rate was at 3.62% in 2020. The payments that borrowers make are taken into account immediately, rather than on a monthly or yearly basis, which can affect the overall interest rate.
A mortgage payment holiday allows borrowers to skip mortgage payments for a certain period (no longer than 6 months) due to unforeseen events. The downside is the interest rate may rise in the meantime.
In case you overpay at any time during your mortgage term, some lenders might let you withdraw that money at a later point. This might help borrowers save on interest and use the mortgage like a savings account.
In most situations, borrowers can switch between different types of flexible mortgage plans without having to pay any extra fees or apply to remortgage.
Flexible repayment mortgages are a traditional model, where the borrower’s capital and interest rate gradually reduce during the mortgage term.
This type of payment usually allows borrowers to overpay, underpay, or take payment holidays.
Flexible offset mortgages give borrowers the opportunity to save money on interest by linking their savings account to their mortgage. In this case, funds the borrowers have in their savings account offset the interest they pay.
With this type of mortgage, the interest of the property loan stays the same for a specific period of time. They usually last for up to 5 years, but there are some mortgage providers that can offer a fixed rate of up to 10 years.
A flexible tracker mortgage is a type of mortgage where the interest rate varies based on the rates of the bank of England. The flexible tracker mortgage is the same as the standard tracker mortgage, except (since it’s a flexible mortgage) borrowers can switch to a different type of mortgage plan at any time.
A tracker mortgage is a good idea if the interest rates are low but stable or high but falling.
Flexible loans come with a variety of features and high-interest rates.
With mortgage plans, there are good, bad, and unfortunate deals.
If you’re unsure what type of flexible mortgage plan best suits your situation, it might be a good idea to seek advice from a broker. You can also talk to different lenders and compare features and requirements or use an online tool to compare interest rates.
In doing your research, here’s what you should consider:
Flexible mortgages are often the go-to loan options for borrowers that want greater control over their payments. From over- and underpayments to payment holidays, these types of mortgages offer many different features to meet your financial needs and circumstances.
Flexible loans are available across the entire territory of the UK. If you’re considering applying for one, it’s best to talk to mortgage brokers, who cover most of the market.
A flexible drawdown mortgage is a flexible retirement mortgage that lets you take cash from your home, without having to downsize.
If you want to know what is a flexible mortgage and what it offers, you can read our guide and use additional mortgage comparison tools online to compare different flexible loan plans.
My name is Marija, and I'm a financial writer at DontDisappointMe. Although finance might not be everyone's cup of tea, my 10+ years of working in one of the biggest banks in my country, and my interest in extensive research on everything finance/investment-related, have made me somewhat of an expert in the field (if I do say so myself). No longer having the passion to work in a corporate setting, I decided that I couldn't let all of this knowledge go to waste so I started writing. And, here I am! Today I try to share my knowledge with my audience in the hopes of making this topic as simple and interesting as possible. In my leisure time, I like spending time with my family and travelling to new locations.