Flexible Mortgages
The flexible mortgage is a relatively new type of mortgage, or at least new in the UK. It was invented and has been used in Australia for many years, but is now growing in popularity in this country as more and more lenders adopt it.
A bit of background
The traditional UK mortgage has been with us for many generations. It was designed with the assumption that people had full time employment and could therefore cope with set monthly payments for a 25 year period. However, as many people have discovered, the traditional mortgage does not always cope well with modern employment trends, such as contract working, self employment, job sharing and part time work.
This is where the flexible mortgage comes in. It has the facility for both over and underpayments built into the loan. What this means is you can overpay your mortgage when finances allow (pay rise, bonus, an inheritance etc.), and then, providing you have made overpayments in the past, underpay when finances are tight (job loss, change in circumstance etc).
A generic example
If you overpay your loan by £50/month for, say, five years on a flexible mortgage, that cumulative amount is then made available as a cash reserve for you to draw on at any time during the remainder of the mortgage term. This cash reserve can normally be drawn on for such things as taking payment holidays or making large purchases. Indeed some lenders actually issue the borrower with a cheque book and encourage them to use the account as an all-encompassing bank account. However the amount you can withdraw is limited by the original sum of the loan.
The main benefit of drawing against your 'mortgage account' is that mortgages usually charge a lower rate of interest than alternative methods of borrowing. However, any potential saving in the interest rate should be balanced with the consequences of possibly repaying the debt over a longer term. Indeed, more total interest may be charged and this would mitigate the positive effects of any interest rate savings you may have received.
If on the other hand, you overpay but never make any withdrawals, you can save a significant amount of interest over the life of the loan. This is because most lenders who offer this type of loan calculate the interest you pay on a daily basis (see what to look for), therefore any overpayment comes immediately off the debt and interest payments are adjusted accordingly.
See Also: Flexible Mortgages: What to look for
We accept remuneration on a fee basis and/or a commission basis. This will be agreed with you at the outset. We would normally charge a standard £ 300.00 for our services, this will be waived if a life assurance, critical illness, income protection or similar policy is arranged where the commission value is £ 300.00 or more. If we agree to work on a fee basis in place of, or together with commission, we will provide you with a separate fee agreement confirming our charges and any related expenses before carrying out any chargeable work. Details for the payment of our fees are confirmed in the fee agreement.
We reserve the right to charge you a fee, without the need for a separate fee agreement, if you subsequently cease to pay premiums on any policies we arrange for you. This could apply for a period of up to four years and will reduce pro rata in line with the commission we are obliged to return to the Product Provider. The maximum amount of the fee will be no more than the amount of commission disclosed in the illustration.
Your home may be repossessed if you do not keep up repayments on your mortgage.