Skip to content

Flexible Mortgages > Rightmortgageadvice.co.uk

  1. Home
  2. mortgages
  3. product types
  4. Flexible Mortgages

Flexible mortgages explained

There is not really a fixed definition of flexible mortgages although they tend to share several common features.

Firstly there is typically the option to make overpayments without penalty, and to either make underpayments for some time or even to take payment holidays.

It's usually the case that you can only apply to make underpayments or take payment holidays once you have had the mortgage for a certain period of time, in some cases you may have to overpay before you can make an underpayments.

It is generally accepted that all flexible mortgages should have a daily calculation of interest which is important if you do make overpayments as it means that extra capital will instantly reduce the interest portion of your payments.

This can make a significant difference to total interest repayable over a mortgage, however there are relatively few mortgages nowadays with monthly or annual interest calculations anyway.

Another previously common feature of flexible mortgages was to have a drawdown facility, allowing you to borrow a fixed amount of extra funds at any time without requiring new approval.

This was usually agreed as part of the loan to value limit of the mortgage.

For example if you remortgaged and your loan to value was 72% the lender may have agreed that you can borrow up to 3% of the valuation at any future date without requiring new income verification or valuations.

This feature might even have been available through a cheque book or credit card tied to the mortgage account which allowed access to the extra funds available without even having to approach the lender to withdraw the money.

Care needed to be taken though with the terms and conditions around extra borrowing to ensure no nasty surprises.

These drawdown facilities are now very rare and are no longer offered by most of the lenders who used to do this, mainly due to changes in regulation that oblige lenders to consider affordability prior to advancing additional funds.

However offset mortgages can provide an alternative to these features

Another feature which may make part of a flexible mortgage arrangement might be in the inclusion of a current account linked to the mortgage or even an offset facility.

A current account feature which offsets balances against the mortgage interest can help to chip away at your mortgage balance as even if the account is only full for a couple of weeks in the month it still means you make an effective overpayment every month.

Many products from high street banks now meet flexible mortgage terms as standard however there is still a broad range of difference between the rules applicable to each lender particularly around overpayments and early redemption penalties.

The pros and cons of flexible mortgages

Pros:

  • Features which make the mortgage easier to live with
  • Daily calculation of interest
  • Possibly option for regular or unlimited overpayments
  • May include offset facility or linked current account
  • Drawdown facilities may be included offering further borrowing at competitive costs

Cons:

  • Some features may only be available after several months
  • Some features may cease being available in arrears
  • Arrangement costs and interest rate may be less competitive

From the blog...

  • The value of mortgage advice - An unmarried couple with children making an application in a sole name

    In this series we're exploring the hidden value of mortgage advice. Most of the time when people think about why to use an advisor the slightly cliched norms of being whole of market, inside knowle...

  • What are the real costs of mortgage advice and who pays a brokers commission?

    I've decided to write about the real costs of advice to consumers, to dispel some of the myths and preconceptions. As a forward, I thought I'd explain my misconceptions prior to getting involved in...

  • Don't believe the tripe; self-employed mortgages - do you need an accountant?

    The internet is awash with misleading nonsense, out of context facts and the well intentioned leaving a wake of misinformation. In this series we're out to debunk the myths and illustrate the value...

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT. YOU DO NOT HAVE TO PAY A FEE FOR OUR SERVICES AS WE RECEIVE COMMISSION FROM LENDERS. SOME BUY TO LET AND COMMERCIAL LOANS ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY
© RIGHTMORTGAGEADVICE.CO.UK 2009-2016
RIGHTMORTGAGEADVICE.CO.UK IS AN APPOINTED REPRESENTATIVE OF JULIAN HARRIS MORTGAGES LTD, AUTHORISED AND REGULATED BY THE FINANCIAL CONDUCT AUTHORITY. FSA NO 304155
THE FINANCIAL OMBUDSMAN SERVICE (FOS) IS AN AGENCY FOR ARBITRATING ON UNRESOLVED COMPLAINTS BETWEEN REGULATED FIRMS AND THEIR CLIENTS. FULL DETAILS OF THE FOS CAN BE FOUND ON ITS WEBSITE AT WWW.FINANCIAL-OMBUDSMAN.ORG.UK

Get advice
Request mortgage advice
close the form
Your details
Contact details
Enquiry details

Request impartial advice from one of our qualified mortgage brokers. By pressing submit you agree to the Terms & Conditions and Privacy Policy.