> Flexible Mortgages - UK Guide
In a nutshell
A mortgage that gives you control of your mortgage management.
Best Mortgage For
Self-employed, contract workers, part-time workers, people in changeable employment, individuals that want more mortgage flexibility.
Flexible mortgages can be based on all mortgage types and some may offer introductory deals such as fixed, variable, capped and discounted rates. If you do secure a special deal you will tack the discount on top of a standard variable rate or tracker deal for a pre-agreed period.
Typical Amount to borrow
Generally, standard borrowing terms will apply here (3-4 times a single income and 2.5-3 times a joint income). The flexible nature of these products does allow a lot of lenders some leeway here and it's possible to arrange self-certification borrowings and to borrow 100+% of your property value.
No deposit is necessary for 100% mortgages. In all other cases, it is likely that standard terms (5%+) will be applied.
The primary advantage of a flexible mortgage is its very flexibility. This type of product allows you to take control of how you repay your loan. So, you can make over-payments and under-payments as dictated by your financial situation at any given time without being charged extra. You will also be offered certain 'add-ons' such as repayment holidays. And, in most cases, interest is generally calculated on a daily basis rather than annually so making an overpayment will have an immediate effect on your mortgage balance. Flexible mortgages also make it much easier for consumers with non-typical employment status such as the self-employed and contract workers to apply for a mortgage as they are the primary target market for many lenders here.
What to look out for
Although designed to be flexible, some lenders will set out certain rules for flexible mortgages. These can work both to your advantage and disadvantage. For example, you may find that you can only take a repayment holiday or make an underpayment if you have built up enough 'credit' or you may be limited in how times you can make use of these services over a set period (usually a year). Although this can be seen as constricting, this kind of structure has been designed to help you keep on track with your mortgage repayments as much as possible. You may also come across restrictions on overpayments - if you do think that you'll be overpaying regularly or paying in occasional large amounts, then check the small print to see if there are any such restrictions attached. One of the most significant problems with flexible mortgages is actually to be found in their very flexibility. If your chosen deal does not impose restrictions on you and leaves you completely in control then it can be all too easy to fall behind - so it's important to be disciplined here. Another factor to consider is the rates you will get. Flexible mortgages will generally follow your lender's standard variable rates so you will be paying a little extra. If this is an issue then you can always opt for a tracker deal which will give you an element of security.
Offset mortgages and current account mortgages take flexible mortgages one step further and may be a suitable alternative.