What Is A Flexible Mortgage

What Is A Flexible Mortgage



What is​ a​ Flexible Mortgage?
A flexible mortgage is​ a​ secured loan,​ which can be paid back in​ differing amounts while providing access to​ the​ housing equity (within pre-agreed limits).
There are five key features with a​ flexible mortgage: the​ ability to​ pay the​ mortgage off early through overpayments or​ lump sum payments,​ the​ ability to​ borrow money back by withdrawing lump sums,​ making underpayments,​ and having payment holidays .​
a​ flexible mortgage gives you​ more control than with a​ traditional type of​ mortgage,​ and the​ overpayment feature can significantly save money on​ your mortgage,​ for example:
Example 1: £140,​000 mortgage,​ interest rate 6%,​ mortgage term 25 years.
Monthly mortgage payment was £902 and increased by £50 to​ £952 – the​ overall cost saved would be £16,​193 and the​ adjusted mortgage term would be 22.2 years.
Example 2: £100,​000 mortgage,​ interest rate 7%,​ mortgage term 30 years.
Monthly mortgage payment was £665 and increased by £50 to​ £715 – the​ overall cost saved would be £31,​193 and the​ adjusted mortgage term would be 24.2 years
Lump sum payments can also make a​ significant difference to​ your mortgage .​
For example,​ £150,​000 mortgage,​ interest rate 7%,​ mortgage term 25 years – if​ you​ made a​ £10,​000 lump sum payment after 5 years of​ having the​ mortgage,​ the​ interest saved would be £26,​576.81 and the​ time saved would be 2 years and 10 months .​
If you​ made the​ £10,​000 lump sum payment after 1 year of​ having the​ mortgage,​ the​ interest saved would be £36,​949.05 and the​ time saved would be 3 years and 8 months (all figures are approximate).
Two additional reasons for making overpayments on​ your debt with a​ flexible mortgage are:
Save interest – the​ interest charged on​ your mortgage is​ normally higher than the​ average savings account .​
Consequently,​ it​ is​ better to​ pay off your mortgage with an​ interest rate of​ 6.9%,​ than putting your money into a​ savings account with an​ interest rate of​ 4.3%.
Reduce the​ capital debt – all the​ extra payments reduce the​ capital debt rather than just paying the​ interest on​ your flexible mortgage; in​ the​ beginning,​ up to​ 95% of​ your monthly mortgage payments goes on​ paying the​ interest and only a​ small amount of​ your monthly payment is​ paid on​ the​ capital debt.
A flexible mortgage can be tailored to​ a​ borrower’s lifestyle and needs as​ there are different types of​ flexible mortgages in​ the​ market place .​
Some flexible mortgages can be quite restrictive with no underpayment facility and limited access to​ overpayments,​ whereas another type of​ flexible mortgage can give enormous scope for borrowers’ to​ deposit and withdraw sums of​ any amount at​ any time.
A flexible mortgage has a​ higher interest rate than a​ conventional mortgage,​ but the​ key selling point for a​ flexible mortgage is​ the​ longer-term savings on​ interest that can be made by making overpayments and lump sum payments to​ get ahead in​ the​ repayment schedule,​ thus paying off the​ mortgage early .​
In a​ recent survey of​ borrowers’ who had a​ flexible mortgage: 32% had used the​ overpayment facility,​ and 90% who had overpaid would do so again .​
51% who had not made overpayments were planning to​ do so in​ the​ future .​
69% of​ borrowers’ who had made overpayments had been doing so for more than six months,​ and 87% intended to​ continue overpaying until the​ mortgage was paid off .​
Most overpayers looked upon overpayments as​ a​ long-term plan for clearing their mortgage debt and saving money in​ the​ long run.
Although the​ flexible mortgage is​ a​ fairly new type of​ mortgage on​ the​ market,​ it​ is​ becoming an​ increasingly popular choice for borrowers’,​ and lenders predict that the​ flexible mortgage will become more accommodating for borrowers’.




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