Flexible Mortgages
The Flexible Mortgage
Need a Payment Holiday
Todays Flexible Mortgage takes many shapes and forms, with borrowers being able to choose from a host of exciting features and methods of rate control. Although you tend to pay a slightly higher interest rate, the benefits of Flexible Mortgages make this product the most appropriate Mortgage choice for many. Flexible Mortgages were introduced with the intention of making mortgages more suitable for those with different working lifestyles that were becoming increasingly popular, such as being self-employed or an I.T contractor for example. The fact that you could take a payment holiday, or overpay and then underpay was an obvious benefit for people whose income varied considerably each month. Flexible Mortgages have since become more sophisticated and have attracted new types of customers. Some people opt for a flexible mortgage because they wish to repay their Mortgage more quickly and like the flexible overpayment elements. Other people with large amounts of cash savings do well to take advantage of the successful Offset Flexible Mortgage which allows you to offset a savings account against the Mortgage interest you pay thereby reducing the term of the Mortgage.
Current account Mortgage
Mortgage and savings together
With a current account mortgage (CAM), you run your finances including your mortgage, savings, loans, any other debt through one account. The idea is that by having all your money in one place, all your resources pull together to reduce the mortgage debt and save you thousands of pounds in the long term. Your salary goes into the current account mortgage each month and at the end of the month any remaining money goes towards paying off the mortgage, thus reducing the size of the loan that you are paying interest on. One of the added benefits of current account mortgages is that by moving any other outstanding loans and debts into your mortgage account you will achieve the same low interest rates as you do for your mortgage. Also, interest is calculated on a daily basis, which reduces the total amount that you have to pay in the event that you overpay the minimum amount. In order to understand the way the current account mortgage works, you may wish to imagine it as a large overdraft. You pay your salary into the account each month, thus reducing the size of the overdraft and therefore the amount of interest owed. Even though you will also be taking money out of the account, you will have reduced the size of the overdraft overall which means less interest owed and a reduction of the time during which you have to pay back the mortgage. As with many flexible mortgages, you will probably find that you pay a higher interest rate for a current account mortgage but if you use the account sensibly and maximise its full potential by clearing your mortgage debt sooner than planned, then it should work out cheaper for you than paying a lower interest rate over a longer period. Due to its nature of having a pool of money each month that could be spent or saved the current account mortgage is not for everyone. The fact that your savings are offset makes it an ideal option for those with substantial savings. If you don't have much in the way of savings, prefer a lower interest rate or fixing your Mortgage payments is more attractive to you, then it might be best to avoid a current account mortgage. It takes discipline and a bit of financial discipline in order to maximise the potential of a current account mortgage, so your personality as well as financial situation should be taken into account when weighing up whether to opt for one.
What you should look for
The features it should offer
Its important to realise that not all Flexible Mortgages offer the same amount of flexibility. The minimum features that you should be offered are: 1. Take a payment holiday 2. Overpay or underpay 3. Borrow back your overpayments 4. Benefit from daily interest calculation 5. Not be tied in by any redemption penalites Make sure you find out exactly what the mortgage provider is offering and take care to work out whether it will be worth your paying extra for these features. An increasing amount of traditional mortgage loans now include some flexible elements such as the ability to overpay without being charged a penalty. As with other variable products should you require a Flexible Mortgage that has no redemption charges at all then you should expect to pay more for the product.
Disclaimer
James Raynor is Authorised and Reulated by the FSA (463141). You may be charged a fee for the processing of your application and this fee and we estimate that this fee will be £195. Your Home is at risk if you do not keep up the repayments of a Mortgage or any other loan secured against it.
