Articles > Flexible Repayments

Flexible mortgages are fast becoming one of the most popular mortgage schemes available on the market. This is simply because they enable a certain escape from the strict conditions and restrictions associated with the more traditional mortgage schemes. Financial security is not guaranteed, and simply because an individual was once in the position to cover the repayments of a mortgage does not mean that they will maintain this financial situation for the duration of the mortgage. Furthermore, more and more mortgage companies are flooding on to the market, and so there has really never been a better time to make a mortgage application, since the consumer has the upper hand in this overcrowded sector of the financial market.

There are various selling points that could constitute a ‘flexible mortgage’; some companies may offer all of these conditions whereas others could only include a selection, so as with any type of mortgage the advice to ‘shop around’ still applies, until the most suitable flexible mortgage scheme for you individually is uncovered. By far the most attractive feature of a flexible mortgage is that the customer is in the position to pay off their mortgage much earlier than was foreseen in their initial mortgage projection. The customer can make lump sum contributions towards their mortgage loan, in addition to their monthly repayments should they find themselves able to afford this. In short, the mortgage is ‘flexible’ in that it can adapt to any fluctuations in the customer’s financial situation. However there will be restrictions on how much of the mortgage can actually be repaid in a ‘lump-sum’ payment. This is usually fixed as a percentage rate of the remaining mortgage balance, and on average is at fifteen percent of the outstanding mortgage balance.

A further way in which a ‘flexible’ mortgage scheme can adapt to the changing financial situation of the customer is through ‘overpayments’ and ‘underpayments’ . This means that at times when they are able to afford it, a customer can contribute more in their monthly repayments, and equally, during more difficult financial periods, they can opt to make less than their monthly repayments. However, it is important to consider, that especially with the underpayment option, a customer could eventually drag out their full mortgage repayment over a much longer period, meaning that they are financially burdened in this way for a much longer time. Many companies offering ‘flexible’ mortgage schemes also include the option to ‘borrow back’ money they have already contributed in mortgage repayments. This is especially useful at times when a lump sum of money is required by the customer, since it avoids the hassle of applying for a personal loan with another personal loans company. However, it is yet again important to consider that this function of the flexible mortgage could once again extend the mortgage repayment process unnecessarily. Once the money has been ‘borrowed back’ it is relatively difficult to gather this amount of money together again, which can in certain circumstances be at the detriment to the customer’s financial situation.

All in all, a ‘flexible’ mortgage has the potential to be a very effective mortgage solution, enabling the customer to adapt their repayments to their every changing financial situation. Yet, it remains important not to be lured into a repayment process that is much longer than necessary, by exploiting the opportunity to make ‘underpayments’ or becoming too dependent on the payment holidays that may be offered by the mortgage companies.