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Flexible Rate Mortgages Explained
Flexible Rate Mortgage
Flexible rate mortgage schemes allow you to overpay and underpay without redemption penalties being charged. You can tailor your current financial situation to the mortgage payments that you make. When you have spare cash you can overpay and if necessary you can underpay, skip a mortgage payment or even borrow money against the capital repaid.
Not all flexible mortgages are the same. Some will restrict how much you can overpay during a set period, others will only allow minimum amounts and some will allow a maximum amount per month.
Restrictions can also apply to borrowing against the capital already repaid. In fact, some mortgages labeled as flexible do not allow you to borrow any money against your mortgage. If borrowing is permitted you should check how easy it is to access the cash you require.
Flexible Offset mortgages
There is a type of flexible mortgage that helps you to make even more of your money; the 'current account mortgage'. With this type of mortgage, your current account balance is offset against the outstanding balance on the mortgage. For example, if you have an outstanding mortgage balance of £100,000 and a current account balance of £5000, your mortgage interest will be based on an outstanding balance of £95000. For further details see Go Directs offset mortgage section.
Pros and Cons of Flexible rate mortgages
- You can pay off your mortgage early, without penalty, by making overpayments.
- You can borrow against mortgage overpayments or equity in the property more easily, and at a lower interest rate than a 'standard' loan. (dependent on the type of flexible mortgage)
- You are able to change mortgage at any time without being penalised as there are no early redemption penalties.
- You can benefit from a fall in the Bank of England's base rate that leads to a subsequent fall in your lenders standard variable rate.
- Making too many underpayments could result in extending the mortgage repayment period.
- The Bank of England base rate can be unpredictable and can increase rapidly, resulting in an increase in your monthly payments.
- It is less easy to budget as the interest rate can and will vary.
- This style of mortgage requires a disciplined approach.
Do you want fee free flexible rate mortgage advice?
For advice on flexible rate mortgage or remortgage schemes please complete our flexible mortgage enquiry to speak to a professional mortgage advisor.
You may also be interested in:
- Mortgage Protection Insurance
- Best Flexible mortgage
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- Fee Free Mortgage Advice
- UK Life Insurance Quote
We normally do not charge a fee for mortgage advice, however this is dependent on your circumstances. Our typical fee would be £500
Think carefully before securing other debts against your home, your home may be repossessed if you do not keep up repayments on your mortgage.
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