The flexible mortgage (also known as the Aussie mortgage) is becoming more and more popular in the UK. It was first developed in Australia and the choices you have with regard to how you pay your mortgage over the 25 year period, is as the mortgage says “flexible” The flexible mortgage is said by some to make the traditional British mortgage look ancient.
The advantages of a flexible mortgage
If you decide to take a flexible mortgage, you the borrower can underpay, overpay, take payment holidays, borrow funds back and benefit from day to day interest calculation. This can save the lender thousands of pounds and take many years off the mortgage term. As well as all the above there are no redemption penalties to pay. There are some flexible mortgages that allow you to double up as current account so your salary is paid into the same and you effectively pay off your mortgage as an overdraft. Most people with a flexible mortgage make more than the required payment of their mortgage. This may seem a little strange but it makes excellent business sense. As you will be paying off your mortgage earlier and saving £1000’s
Most flexible mortgage companies allow you to take a payment break for up to a year. You do however need to have built up enough payments to compensate for the time you are thinking of taking off from your payments. With most lenders, the terms and conditions of the time you take away from payment will vary. Taking time away from repayment could be useful to you if you want to take some extra time saving and start a family, or invest in some renovations to your current home. However, some lenders may only let you take a couple of months' payment holiday each year.
Not all flexible mortgage lenders offer the same advantages and their policies differ for different issues. So do take the time to consider what it is you require? Make sure you confirm this with the lender and seek advice to find the perfect mortgage for you. The disadvantages of a flexible mortgage If you do decide to take out a flexible mortgage, you the borrower will have to be inflexible if you intend to pay your mortgage early or take a payment break. You could find yourself paying the minimum payment every month at an interest rate that is higher than a mortgage of the fixed rate. If you do intend to pay more then the flexible mortgage could be for you? If you do not intend to pay more and would rather pay one fixed payment maybe another choice is in order. Please seek advice from a broker if you are interested in this package.
Flexibility within your mortgage does have a downside? Flexible mortgages do usually have a higher interest rate than most other mortgages. However you do have to ask yourself the question is the flexibility going to benefit you in the long term, will it help you pay your mortgage off earlier than planned. Also, remember to look into some fixed rate mortgages as some lenders do allow you pay lump sums from your balance at any time during your mortgage period.