Flexible Rate Mortgages Explained

What is a Flexible Rate Mortgage?

Flexible rate mortgage schemes allow you to overpay and underpay without a 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.

Your home may be repossessed if you do not keep up repayments on your mortgage

Pros and Cons of Discounted Flexible Rate Mortgages

Pros

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 here 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

Cons

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 No Fee Flexible Rate Mortgage Advice?

For advice on a flexible mortgage or remortgage schemes please complete our flexible mortgage enquiry to speak to a professional mortgage advisor.