In the mid-90’s a small number of lenders started offering homebuyers a radical new type of mortgage, the flexible homeloan. Flexible mortgages have long been the norm in Australia, and their popularity has quickly caught on
in the UK. Today, all the major mortgage lenders are offering flexible mortgages that allow the homebuyer to take greater control of their finances.
A truly flexible mortgage offers:
The starting point of all flexible mortgages is the ability for the borrower to make overpayments on their mortgage. The main advantage being able to pay your debt off as quickly as possible.
With truly flexible mortgages, you can make underpayments, which could be useful when you have substantial additional expenditure – at Christmas or when you are on your summer holiday, for example. Most lenders will insist that you have made overpayments before you can underpay.
Many lenders also allow you to take payment holidays if you wick. Again, you will have had to have made overpayments first, in order to build up a ‘buffer’ of money.
There may be occasions when you need to access a large sum of money. With many lenders you can borrow back your overpayments with a cheque payable in your name, or you may be able to access the money with your own cheque book or Switch/debit card.
A redemption penalty is a fee charged by a lender when you ‘redeem’ (pay off or move) your mortgage. A truly flexible mortgage should have no early redemption charges, as the main benefit is to encourage borrowers to pay off their debt as quickly as possible.
Interest are calculated daily for the benefits of overpayments to work hardest for you. If the lender calculates interest annually, there is no point in making an overpayment before the last day in the year.
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