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All About Flexible Mortgages

Mar 10, 2008
Flexible mortgages were first introduced into the UK to cater for individuals with intermittent working patterns. Flexible mortgages are a recent addition to the home loan market in the UK, although they have been popular overseas for several years.

The initial target market for this type of home loan product was people who have irregular working patters such as the self-employed, and people who receive irregular payments such as bonuses and commissions. Typical features include, overpayments, underpayments, drawdown of overpayments made, additional borrowing facilities, and no (or low) redemption penalties.

In addition to the features that allow for flexibility with payments, the interest on flexible mortgages is calculated on a daily basis. This can result in massive savings to the borrower and can significantly reduce the term of the loan. This is particularly the case when borrowers deposit all of their incomes into the loan immediately when they receive them. This ensures that they save as much interest as possible during the life of the mortgage.

For this reason flexible home loans have become popular with people in all types of employment who are looking to pay off their home sooner. While the initial target market may have been the self-employed, people from all walks of life are now reaping the benefits from this new type of home loan product.

Interest rates are generally higher on flexible mortgages than for traditional products to counter the increased risk of the borrower not repaying the full balance of the loan by the end of the term. The flexibility of this type of home loan product allows for this to happen. Some products can also be linked with current accounts, chequebook facilities, debit and credit cards, unsecured loans, and offset accounts.

One popular type of flexible home loan is the offset mortgage. This type of product will offset any positive balance of funds in a bank account held with the same lender, in order to reduce the amount of interest payable. Borrowers should be aware, however, that the interest earned on savings in the deposit account will be liable for income tax.

Another type of flexible mortgage that has become popular in recent years is the current account product. Flexible home loans of this type combine the loan with a current account and credit card facility in order to streamline the borrower's banking facilities. Products of this type are sometimes referred to as a "line of credit". Borrowers can draw down on the line of credit for any purpose making it a popular choice for people who are renovating their homes.

Home loans of all types have been gaining popularity in recent years and should continue to do so as lenders find new ways of satisfying a widening array of customers' needs. If you are considering applying for a flexible mortgage you should first receive unbiased advice from an independent mortgage advisor.

An independent advisor will be able to assess your financial situation and your borrowing needs and offer advice as to which home loan products are the most suitable. An independent advisor will have access to the entire UK mortgage market meaning they can offer mortgage advice from many different lenders.
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