The
idea of a flexible mortgage is that you can
alter your monthly payments to suit your changing circumstances
without penalty.
This can include
making
regular or occasional overpayments
making
underpayments
taking
payment holiday
even
drawing down additional cash if you need it.
In
the past you could expect to be charged a higher rate
of interest for a flexible loan.
But now so many mortgages come with these features
that you shouldn't have to pay extra.
Comparing flexible deals
Not all mortgages marketed as flexible will have all the features
listed above.
So, when you're comparing deals, be sure to read
all the small print.
Or
ask the lender and take notes of what they
said (get the name of the person you talked to aswell).
Also check if there are limits on the amounts or frequency with
which you can over or underpay without penalty.
The benefits of flexibility
The major benefit of this type of deal is that you can clear
your loan early potentially saving thousands of pounds in the
process by overpaying whenever you have cash to spare.
For example, if someone with a 25-year £150,000 repayment loan
charging 6 per cent annual interest paid an extra £100 a month,
they could clear it almost five years early, saving £30,000
in interest.
If, on the other hand, cash is tight, you can take a break from
paying altogether. Of course this can backfire
The dangers of flexibility
Think long and hard before opting to underpay or take a payment
holiday.
The full interest will still be clocking up on your loan every
month with interest charged on the unpaid interest.
This will have to be paid off eventually, and the
longer you leave it, the worse it'll get.
Flexible or offset?
Flexible and offset mortgages have several features in common.
If you're trying to decide which to go for, read Offset
versus flexible mortgages.
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