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Flexible Tracker Mortgage the Best of Both Worlds

Apr 28, 2008
Flexible Tracker Mortgages, simply put, is a flexible mortgage plus a tracker mortgage. That is, it is a mortgage deal which combines the features of both flexible and tracker mortgage models.

The Flexible Part of the Deal

Flexible Tracker Mortgages imparts flexibility to the mortgage payment schedule. Borrowers in this arrangement have the option of over paying, underpaying and payment holidays. It is a mortgage plan, ideal for the self employed who do not have consistent income streams, and require such flexible tools. Moreover, this option also helps long term financial planning and control. All anticipated and unanticipated expenses can be much better managed in this deal. For example, those undergoing a job transition can temporarily withhold the mortgage payments and thus better administer the remaining expenses. Meanwhile those who can afford over payments can make the extra payments and enjoy the fact they helping to repay their mortgage early. So, if you love to be your own boss and like to have better control of your financial situation, a flexible mortgage is the option.

The Tracker Part of the Deal

Flexible Tracker Mortgages, in addition to the above stated flexibility feature, also deploy the principle of a tracker system. This concept links the interest charges on the mortgage with the Bank of England (BOE) Base Rate. The mortgage interest rate in a tracker model is a rate which varies with the Bank of England base rate, with a fixed variation limit. This variation could be above or below the base rate. The precise clauses of the mortgage schedule however vary. For instance in a few cases the rate might be associated with BOE rate for a number of years followed by a pre-defined structure. Here the pre-defined structure ought to be closely analysed to ensure optimal benefits.

Among the various pros and cons of this mortgage type, a clause that deserves special mention is the absence of upper limit. Because tracker mortgage varies with the base rate, it can go up indefinitely and the impact could be substantial in the long run.

The Combined Flexible Tracker Mortgage Deal

The above outlined features of both mortgage plans i.e. flexible and tracker are combined in this package. The mortgage rate depends upon the BOE base rate and the loan payment structure also enables flexible payments. Do take time to shop around and check the features offered with each type of Flexible Tracker Mortgage deal.

Flexible Tracker Mortgages have just been described in an easy to understand format of a mortgage that can be quite complex. There are many ifs and buts in the deal, which might not be as easy to decipher. For instance, some deals have an ERC - Early Repayment Charges. For large mortgages, this could hit the pocket hard.

Similarly, LTV - Loan to Value is another feature, which deserves due attention. LTV is the ratio of borrowing capacity and property's value. Not all Flexible Tracker Mortgages offer 100% of the value of the house and if they do there could a higher lending charge.

Another clause that sometimes is not very clear is the upper and lower limit of borrowings, insurance charges and other not very explicitly explained, the mortgage fees. These might not seem very important at initial stages; however the minor asterisks could easily add-on unmanageable amounts at later stages.

The Flexible Tracker Mortgage is an intelligent concept with abundant options. To help clarify what sort of deal you are buying into, it is advisable to seek expert advice from an independent mortgage advisor. The advisor will help you explore the nuances of Flexible Tracker Mortgages, with personalised factors taken into consideration.
About the Author
Darren Banthorpe wrote the article 'Flexible Tracker Mortgage - The Best of Both Worlds' and recommends you visit http://www.offsetmortgagecentre.co.uk/flexible-tracker-mortgage.html for more information on the flexible tracker mortgage.
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