Flexible Mortgages

Relatively speaking, flexible mortgages are a recent addition to the UK mortgage market, even so they have found favour with a great number of borrowers who like the freedom and options that this type of home buying product offers to them. This freedom comes from the fact that the monthly repayments are not fixed or calculated in a strict manner, unlike other forms of mortgage it is the borrower who decides on how much to repay each month, within certain limits.

There are many ways in which a flexible mortgage is similar to a more standard variety, after all it is still in essence a secured loan designed to provide the money needed to make a house purchase. When arranging such financing, the borrower will need to undergo a credit check and the house will need to be valued, as is the case with all mortgages.

Flexible mortgages are available in a few different forms, some will have a fixed interest rate for a period of years before reverting to a standard variable rate (SVR), others a variable from the outset. Which you choose will depend on the rates on offer at the time, your circumstances and which one you would feel happier with.

The defining feature of this form of mortgage is the degree of control that it offers to the borrower in terms of the repayments. Repayments are measured against a pre-agreed 'standard' amount - amounts less than this are deemed as 'underpayments' while those above it are known as 'overpayments'. Typically the borrower is free to make as many overpayments as they like, without restriction - this has the effect of clearing the debt faster, and as the interest is calculated daily this will instantly decrease the cost of the mortgage.

The situation with underpayments is slightly different, for obvious reasons there has to be restrictions placed on these, as after all the borrower does want the money back at some point, while these will vary between lenders, typically there will be a limit on how many underpayments can occur in any given year, while some will require that suitable overpayments have been made before hand.

Payment holidays are another key feature of flexible mortgages, these basically allow the borrower to skip a repayment one month, as with underpayments there are restrictions on how often a payment holiday can be used.

So those are the main features offered, but what are they useful for? Well in the main part they are aimed at giving those people with variable incomes a repayment scheme that is too variable, to allow them to adjust their outgoings to match up with their income. People are self-employed, those who have contract based work or even those who receive bonuses from time to time could all benefit from the flexibility offered.

When finances are tight, a flexible mortgage allows for you to reduce your repayments, conversely when you find yourself with some spare cash you can repay more that month, instantly reducing your mortgage and so lessening the amount of interest that you will be charged. Flexible mortgages do carry a premium, however this marginal extra cost can be outweighed greatly by the ability to tailor your repayments to fit with your financial situation at any given month, which is what this type of mortgage is all about.