The Loans Network

Flexible Mortgages

Negotiating a suitable mortgage scheme is one of the most important ‘financial’ decisions the majority of people will ever have to make, since purchasing a home is one of the most expensive processes. It is important to get the terms of your mortgage correct from the very outset, since mortgage schemes with high APR rates, or early payment penalties will ultimately become a huge burden later down the line, and when oftentimes it is much too late. A mortgage is a legal contract, and before agreeing to this with the mortgage lender, a borrower must assess realistically their ability to satisfy the terms and conditions, as well as the suitability of their financial status, when it comes down to monthly repayments and extra charges and fees. For this reason, ‘flexible’ mortgages are increasingly becoming the most popular mortgage option for the majority of people looking to purchase a home or property, simply because, in general, these types of mortgage schemes offer much less restrictive mortgage conditions, in comparison to their traditional mortgage counterparts.

There are various terms and conditions which create the selling points for flexible mortgages, and some mortgage lenders may offer mortgage schemes which contain all of these selling points, where as others may consist of a much smaller selection. Consequently the advice for a flexible mortgage, as would be with any type of mortgage, is to shop around, for the deal that is best for you individually. The most common characteristic of a flexible mortgage is that they enable you to considerably vary your repayment plan, including times when you are able to make ‘underpayments‘, usually during times when you perhaps are over-burdened by financial commitments. Underpayments refers to a monthly repayment contribution that is less that the ones agreed in your original mortgage contract. For times of financial difficulty, flexible mortgage plans may also offer ‘payment holidays’, where you are eligible to a certain period when you will not be expected to make any repayments to your mortgage lender. This is particularly helpful during the more expensive times of year, such as Christmas or in the run up to a family holiday.

However, by far the most attractive feature of a flexible mortgage is that the borrower is in the position to pay off their mortgage far earlier than was first planned. With a ‘flexible’ mortgage, your lender will accept overpayments, or even lump sums towards your mortgage repayments, and unlike ‘normal’ mortgage schemes, if the borrower does manage to complete their mortgage repayments earlier than planned, they are not subject to early payment penalties. A further benefit attributed to flexible mortgages is that they charge interest on a daily rate, so you are not actually charged any interest on repayments you have made within a month, so are not charged interest on money you have already paid. Flexible mortgages can also be used as an alternative to secured personal loans, since many mortgage lending companies offer the option to ‘borrow back’ any money you have already contributed in mortgage repayments. This is often a much more favourable option, rather than taking out a secured loans, since the APR rates on flexible mortgages are usually a good deal lower than those of secured personal loans.

Of course, the conditions of these ‘selling points’ will vary from mortgage company to mortgage company. For example, some loan companies set limits on how much of your mortgage you can pay off in a lump sum payments; this could be fixed at around 15% of your remaining mortgage balance. However, some companies place no limits on the amount of your balance you can pay in one payment. Of course, the flexible mortgage the borrower opts for, is completely dependent on the individual’s financial status and their personal requirements.