A Flexible or ‘lifestyle’ mortgage is designed to let you make extra repayments when you have extra money, and to reduce or even skip payments when necessary. Flexible mortgages are those loans that let the borrower increase or decrease the amount of their mortgage repayments within specific limits.
Advantages of Flexible mortgages
The advantages of Flexible mortgages can be broken down into the separate benefits of each flexible feature or can be stated as the advantages of the mortgage as a whole. Looking at the big picture the Flexible mortgage allows borrowers with a variable income to make the very most of their mortgage and not be penalised. If you have a flexible lifestyle in terms of your working life then the Flexible mortgage attempts to be in tune with that. Other more traditional mortgages do not have the same level of movement built into them so changes in personal circumstances can be costly.
The advantage to allowing over payment on your mortgage is considerable. The total cost of a mortgage by the time it has been completely repaid is governed by the interest repayments on the sum remaining. If that sum is allowed to be reduced when there is extra money available then the total cost of borrowing the money in the first place goes down. Over the life time of a Flexible mortgage depending on the level of over-payment it can easily amount to tens of thousands of pounds in mortgage savings. This is the main feature that first attracts borrowers to a Flexible mortgage but in fact it can be found in some other mortgages so as always it’s worth shopping around.
The advantage of under payment or stopping payment altogether for short periods is often seen in personal terms. If a borrowers income falls sharply the knowledge that mortgage payments can be stopped for a while can go a long way to alleviating money worries. The further comfort of knowing that the lender won’t penalise the break in payment is helpful. Each Flexible mortgage will have rules that govern when and how long these repayment breaks can be.
The ‘borrow back’ feature of a Flexible mortgage really does illustrate the flexibility. It may be that in one month an over payment has been made in the belief that the extra money will not be needed elsewhere but in a subsequent month through unplanned changes in circumstance suddenly the money will be useful. The borrower can now take that money back, it’s not locked into the mortgage and the figures will be readjusted accordingly. The overpaid amount does not have to be borrowed under a separate agreement it forms part of the mortgage.
If you are making regular over payments then the advantage of daily interest calculations is important. This is one feature that doesn’t always seem to be included in the promotion of Flexible mortgages so it’s worth finding out by asking what the situation is with the mortgage you are thinking of choosing.