Pros and Cons of The Flexible Mortgage
The flexible mortgage is a recent product introduced in the UK. It has been around now though for about 10 years or so. It is difficult to define as the features and benefits that it contains vary from lender to lender.
To be classed as a flexible mortgage though at least the 3 basic ingredients.
- Interest calculated on a daily basis.
- The facility to make overpayments anytime you want without incurring any penalty or if required underpay.
- The facility to take payments holidays.
Normally restrictions are set on underpayments and payment holidays as it normally is dependent on the number of overpayments prior.
Many flexible mortgages contain many other features such as, drawdown facilities which can be accessed through cheque books, debit cards or online access. A drawdown facility allows you to borrow up to a predetermined limit without applying for a further advance. The borrowing limit is usually set at about 75% of the LTV (Loans to Value) although higher LTVs or 80%, 85%, 90% can be found.
| Advantages | Disadvantages |
| Interest charged daily so overpayments immediately reduce interest paid. | Usually a set up fee is required. |
| Cheque book and drawdown facility allows other purchases such as car purchase to be done at same rate as mortgage. | Can be too tempting for some and can lead to mortgage balance increasing. |
| Payment breaks or holidays can be used particularly useful for self employed people who’s income may be sporadic. |
