What Is A Flexible Mortgage?

A guide to flexible mortgages

Let’s face it, whether you’re buying your first house or you’re adding to a portfolio taking out a mortgage is a big commitment. You have to keep up with your monthly repayments for your agreed term or face the consequences.

However, if you’d benefit from a little more flexibility, there are a few other mortgage options that might suit you, namely, a Flexible Mortgage.

A Flexible Mortgage works just like a regular mortgage but could allow you to pay in a more irregular fashion. Essentially, it 'bolts on' a few flexible features, making it work for the borrower better. They allow you to make overpayments, underpayments and even take payment holidays.

The specifics of your mortgage will vary from lender to lender, so always make sure you use a reliable mortgage broker to help source the right deal for you.
 

What are the types of Flexible Mortgage?

There are a few different types of Flexible Mortgage to choose from. 

• Flexible Repayment Mortgages
• Flexible Offset Mortgages
• Flexible Fixed-Rate Mortgages
• Flexible Tracker Mortgages

The Pros and Cons of a Flexible Mortgage

Pros

• The option to make overpayments to pay your mortgage back faster
• Your lender could accept pre-agreed 'mortgage holidays'
• You could switch to a fixed-rate mortgage without early repayment penalties or having to remortgage.

Cons

• Interest will keep being charged during any payment breaks, meaning your payment might be larger at the end of it.

Overpayments

Most mortgages require you to make the same regular monthly payment, with no option to over or underpay. Flexible Mortgages allow you to make additional payments on top of your regular ones. This helps you reduce your balance, as well as save on interest. And perhaps best of all, you’ll pay your mortgage off much quicker.

You can make this payment as a lump sum (if, for example, you wanted to top your repayment up with a large inheritance payment) or as a smaller chunk.

You also have the option to regularly overpay by setting up a standing order. As this is totally voluntary, the overpayment can be cancelled at any time.

Remember, depending on your lender, there may be a cap on the amount you can overpay each year. If you’re planning on making a habit of overpaying, make sure you seek mortgage advice from registered professionals like The Lending Channel before committing to anything.
 

Underpayments

In the same way that you have the option to overpay, you may also be able to underpay for a set period of time. Subject to prior approval from your lender, this can help you manage your finances better and allow you some short term leeway should you need it.

However, please note that most of the time the amount you can underpay and the length of time your lender will agree to will be almost entirely dependent on how much you’ve previously overpaid.
 

Interest Rates Calculated Daily

Having your interest calculated daily rather than yearly or monthly is, overall, the most cost-effective method. Any payments you make are immediately taken off your total - and the lower the amount, the less interest you’ll have to pay. This means that any overpayments you make are sure to make a visible difference immediately.
 

Payment holidays

Pausing your mortgage can be extremely useful especially if you’re planning a trip, having a baby or helping a relative to purchase their first home. It’s a short term solution that can make a big difference to your monthly outgoings.

The length of time you’ll be permitted to take a break will depend on your lender, but generally, it could last between 1 and 6 months.

To take a payment break, there is often an application process. Your acceptance might hinge on your history of reliability and whether you’ve overpaid enough to cover the break. It’s important to note that your interest will still accumulate during this time, so you will likely come back to an increased amount once your break is over.
 

Flexible Mortgage Savings Account

Choosing a Flexible Mortgage gives you the option to 'borrow back' the money that you’ve overpaid into your mortgage. It’s essentially like a pot of money that you can dip into in the future should you need it.
 

Switching

This feature allows you to switch to different types of flexible mortgages. You can do this without incurring early repayment charges or having to reapply. 
 

Portability

Notably, if you move properties, some lenders will give you the option to move your Flexible Mortgage with you. This saves time and stress, and you won’t have to reapply for a mortgage or incur any early repayment charges.
 

We’ll find the right Flexible Mortgage for you

Flexible Mortgages can be an excellent option for many people, but it’s important to know exactly what will work for you. The Lending Channel will not only source you the best deals but will take you through each of your options and discuss them in accordance with your specific needs.

Our team has years of experience in specialist mortgage comparison, and we’re confident that we can find the right one for you.

The Lending Channel is fully authorised and regulated by the Financial Conduct Authority (FCA) and is an accredited member of the National Association of Commercial Finance Brokers (NACFB).