Flexible mortgages were first introduced into the UK to cater for individuals with flexible working patterns. Flexible mortgages are a recent addition to the mortgage market in the UK, although they have been popular overseas for several years.
The initial target market for flexible mortgages were people who have irregular working patters such as the self-employed, and people who receive irregular payments such as bonuses and commissions.
Typical features of flexible mortgages include, overpayments, underpayments, drawdown of overpayments made, additional borrowing facilities, and no (or low) redemption penalties.
In addition to the features that allow for flexibility with payments, the interest on flexible mortgages is calculated on a daily basis. This can result in massive savings to the borrower and can significantly reduce the term of the loan.
For this reason flexible mortgages have become popular with people in all types of employment who are looking to pay off their home sooner. While the initial target market of flexible mortgages may have been the self-employed, people from all walks of life are now reaping the benefits from this new type of mortgage product.
Interest rates are generally higher on flexible mortgages than for traditional mortgage products to counter the increased risk of the borrower not repaying the full balance of the loan by the end of the term. The flexibility of flexible mortgages allows for this to happen.
Some flexible mortgages can also be linked with current accounts, chequebook facilities, debit and credit cards, unsecured loans, and offset accounts.
One popular type of flexible mortgage is the offset mortgage. An offset mortgage will offset any positive balance of funds in a bank account held with the same lender, in order to reduce the amount of interest payable.
Another type of flexible mortgage that has become popular in recent years is the current account mortgage. Flexible mortgages of this type combine the mortgage with a current account and credit card facility in order to streamline the borrower’s banking facilities. Flexible mortgages of this type are sometimes referred to as a -line of credit-.
Flexible mortgages of all types have been gaining popularity in recent years and should continue to do so as lenders find new ways of satisfying a widening array of customers’ needs.
If you are interesting in flexible mortgages, contact an independent mortgage adviser to receive unbiased, expert advice.
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