In today’s ever-changing world, people need more and more flexibility when it comes to borrowing and mortgages. With this in mind, more and more lenders are offering what they term as ‘flexible’ mortgages. However, the term ‘flexible’ can mean a lot of different things. If you are unsure about which mortgages are flexible and what the benefits of a flexible mortgage are, then this article might be helpful to you.
What does flexible mean?
Although there are a lot of mortgages that claim to be flexible, there are some things that define a truly flexible mortgage. There are four main characteristics you should look for when determining if a mortgage is flexible. These are:
· Being allowed to overpay
· Being allowed to underpay
· Being able to take payment holidays
· Interest is calculated daily
Overpayments
One of the best features of flexible mortgages is the ability to overpay. With traditional fixed repayment mortgages, there is no easy way for you to pay more than your fixed repayment each month. If you have a flexible mortgage, then you will have the ability to pay as much as you can each month. This means that during the good months you can speed up the process of paying your mortgage back. If you regularly overpay then you can save yourself thousands of pounds in interest payments.
Underpayments are another useful feature of flexible mortgages, but they should be used sparingly. If you are unable to make the repayment in a given month, then you can just pay as much as you can, effectively underpaying on your mortgage. Although this is good as it stops you from defaulting, there are penalties involved. The more you underpay, the longer the mortgage will last or the higher your repayments afterwards will be.
