Flexible Mortgages; getting payment flexibility from your mortgage

These days flexible mortgages are a more useful tool than ever, as people’s working lives and earnings are not as rigid in structure as the old-fashioned 9 to 5 ‘job for life.’ In fact, while flexible mortgages started out as a specific type of deal, some flexible features are now embedded into the mechanics of standard mortgages – as pressure on lenders to meet borrowers’ needs has grown. The good news is, if you navigate the maze of flexible mortgages well, you can end up with a deal that costs you very little in interest and leaves you mortgage-free years earlier than you thought was possible. In order to do this, it’s a good idea to enlist the help of a mortgage broker that specialises in the area, such as The Mortgage Broker Limited (TMBL).

What exactly are flexible mortgages?
Although there is no firm legal – or even industry – definition for the term flexible mortgages, the general consensus is that the ‘real deal’ should come with six features. The first is the facility to make unlimited and penalty-free overpayments on what you owe each month – something that standard non flexible mortgages, still do not permit.

The second and third traits of flexible mortgages are that, the borrower is able to underpay or take a whole month’s payment holiday by as much as they have already overpaid. The fourth feature of flexible mortgages is that borrowers are permitted to ‘borrow back’ what they have overpaid (also known as drawdown), which means avoiding the cost, credit searches and hassle of releasing equity through remortgaging or taking a further advance.

The fifth characteristic of flexible mortgages are related to the others in that they do not come with tie-ins – which means you are free to leave at any time. And finally (the sixth trait), if you do leave, there are no redemption penalties to pay at all. In short flexible mortgages do not restrict or tie you to the lender or the deal in any way shape or form.

Do all flexible mortgages come with all these traits?
No. The mortgage market is huge and very diverse, in which case lenders pick and choose from these flexible mortgage traits. For example, most lenders will now automatically allow borrowers on standard deals to overpay by 10 per cent per annum or a fixed amount, say £500, per month.

Who are flexible mortgages good for?
However, this is not much use if you receive large bonuses throughout the year and want to pour then into paying off your mortgage – if they exceed this limit, you will have to pay for the privilege. Similarly, flexible mortgages are suited to the self-employed whose income can fluctuate from months to month.

What should I do when considering flexible mortgages?
While there is no definitive type of borrower that flexible mortgages are simply NOT good for – though there are some things to consider before jumping in at the deep end. For example, if you are a first time buyer and budgeting is your number one consideration flexible mortgages do not tend to come with the very lowest rates of interest – especially if you are not in the position to fully utilise the available facilities. That’s why it’s a good idea to seek out professional mortgage advice from a broker like TMBL.