Pete Mugleston | Mortgage AdvisorPete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.
Updated: 4th July 2019 *
We receive a lot of enquiries from people who would like to understand what a flexible mortgage is and how the special features available with this type of product can help them with their next property purchase.
In order for you to have a clearer idea of how flexible mortgages work in the UK we have produced this comprehensive guide which covers the following areas:
As the name suggests, a flexible mortgage in the UK is just like any other type of mortgage but with a number of different features added by the lender to offer the borrower a greater amount of flexible payment options.
The features offered will vary between flexible mortgage lenders. Some of the more common ones are:
Interest calculated daily
Flexible mortgage savings account
With a flexible mortgage you have the option of paying over and above the initial monthly payment, set by the lender at the outset, at any stage during the term. This can either be through a lump sum or as an increase to your regular repayment.
As this is optional you can reduce your repayment back down to the original amount at any time. By overpaying you can reduce the overall amount of interest you will pay throughout the term and pay off the balance earlier than planned.
Some lenders may restrict the amount you’re able to overpay on certain types of flexible mortgages (usually up to 10% of the balance). If you go over this amount a charge may apply.
Basically the opposite of overpaying. If needed, you are allowed to underpay by a certain amount for a set period. Usually, this option is only available once you have overpaid and already ahead of the original payments plan.
The terms available for underpayments will vary from lender to lender.
If your mortgage provider allows underpayments, be sure to make them aware you’re underpaying before you do so.
Daily interest calculations
Calculating interest daily is typically the cheapest way for a provider to work out your mortgage interest, as any payments you make are taken into account immediately rather than on a monthly or yearly basis.
This is particularly relevant for flexible mortgages. If, for example, you make an ad hoc lump sum overpayment, this will affect the overall interest due straight away.
Sometimes our financial affairs can become compounded due to unforeseen events. In such circumstances a break from what is usually the largest regular financial commitment can give us time to get back on our feet.
With some flexible mortgages you can take a payment break any time, normally up to a maximum of six months. Some lenders may only offer this if you have previously overpaid or made a certain number of payments.
It’s worth noting that whilst you take a break the interest payments will still accrue, therefore, you may end up paying back more interest across the whole term.
Flexible mortgage savings account
If you overpay at anytime during the term of your mortgage, some lenders offer a flexible feature allowing you to ‘borrow back’ that amount later on if you need it. This feature, coupled with overpayment, allows you to both save money on interest payments and use your flexible mortgage as a type of savings account for any future events.
This feature allows you to switch between different types of flexible mortgage whilst incurring no early repayment charges or having to go through a remortgage application. For example, if you have a flexible tracker mortgage but want to switch to a flexible fixed rate mortgage you can do so.
These features will all vary from lender to lender. If you’d like to know more about which flexible mortgage lenders offer specific features, make an enquiry with us and we can arrange for an expert to contact you directly to discuss further.
Are there different types of flexible mortgage available?
Yes, there’s a number of different types of flexible mortgages, as outlined below:
Flexible repayment mortgages
A flexible repayment mortgage uses the most traditional method of borrowing money to buy a property, whereby both your capital and interest reduce gradually during the term.
A flexible payment mortgage can allow you greater freedom to overpay or underpay and take payment holidays should you need them as outlined above.
Flexible offset mortgage
Flexible offset mortgages use your cash savings to ‘offset’ the amount of interest you pay on your flexible mortgage repayments. For example, with an offset mortgage if you have £20,000 in cash savings linked to an amount borrowed of £100,000 you will only pay interest on £80,000.
Most lenders can offer a flexible mortgage with a range of fixed rates in the same way they would with a traditional mortgage. The added options available with a flexible mortgage can make this type of mortgage very attractive.
If you’d like to know what the best flexible mortgage rates are across the market make an enquiry and we can arrange for an advisor we work with to get in touch.
Flexible tracker mortgage
Flexible tracker mortgages work exactly the same as standard tracker mortgages and will track the movement of the Bank of England’s base rate but with the addition of a number of flexible payment features.
The benefit of a switching feature allows you to move between different types of mortgage. For example, if a tracker mortgage begins to look less attractive next to a specific fixed rate offer, you can move across if you want to without charge.
If you’d like to know more about the different types of flexible mortgages available make an enquiry and we can arrange for an advisor we work with to get in touch.
What is a flexible mortgage calculator and how does it work?
A flexible mortgage calculator is a tool that can be used by either a flexible mortgage lender or mortgage advisor in order to work out how much you may be able to borrow and to give an indication as to what the repayments will be for this type of lending.
Whilst all lenders will use their own calculator based on their specific in-house requirements, the good news is that such instruments are not exclusive to mortgage providers.
You can find flexible mortgage calculators on many UK lenders’ or other online mortgage websites.
What is a flexible offset mortgage calculator?
A flexible offset mortgage calculator is a tool very similar to a flexible mortgage calculator, however it will take into account the savings element which offsets the interest payable for this amount - a key difference between the two lending methods.
Where can I find the best flexible mortgage deals?
Each flexible mortgage lender will offer their own versions of this type of lending with most, if not all, of the typical flexible features included but with different parameters in line with their own in-house regulations.
Trying to find the best flexible mortgages which suits your own personal requirements can be quite a laborious task on your own.
If you make an enquiry with us we can arrange for a mortgage broker we work with to get in touch. As they adopt a ‘whole of market’ approach, they will be able to carry out a flexible mortgage comparison and identify the best flexible mortgage lenders who offer the features and most favourable terms which suit your needs and circumstances.
Frequently Asked Questions
What type of borrower is a flexible mortgage most likely to appeal to?
Flexible mortgages are becoming more and more popular amongst the general public as lots of people are attracted to the many flexible payment features that can be included and the peace of mind this brings.
These type of mortgages would likely appeal to people who are...
Whether your fluctuating income is on a seasonal basis or due to the unique nature of your business, the ability to overpay and underpay on your mortgage is something that can prove to be extremely appealing.
If you’re self-employed and would like to discuss what flexible mortgage deals may suit your circumstances, make an enquiry and we will arrange for a specialist to contact you directly.
What is a flexible drawdown mortgage?
A flexible drawdown mortgage is a type of flexible retirement mortgage and another term used to describe an equity release scheme and is available to anyone over the age of 55. The type of flexibility available for this form of lending relates more to the release of cash sums from the equity within your property.
If you’d like to know more about flexible drawdown mortgages get in touch and we will arrange for an expert to speak with you.
Can I get a flexible overpayment mortgage?
Yes, this could be possible - many flexible mortgage lenders allow borrowers to make overpayments under the right circumstances. See the opening section of the article for more information about flexible overpayment mortgages.
Can I get a flexible mortgage loan anywhere in the UK?
Flexible mortgage lenders operate up and down the UK, and you will find that some have postcode restrictions, especially in parts of Scotland and Northern Ireland.
So, for example, if you are looking for flexible mortgages in Belfast, the number of approachable lenders will be fewer than for a customer who is after one in London.
Therefore, it’s especially important to apply through a whole-of-market broker to make sure you end up with the most favourable interest rates on offer.
Speak to a mortgage expert about flexible mortgages.
Trying to compare flexible mortgages and decide which features are right for you and your own circumstances is one which requires very careful thought. Lots of people seek professional advice to assist them with their decision.
If you have questions and want to speak to an expert for the right advice, call Online Mortgage Advisor today on 0808 189 2301 or make an enquiry.
Then sit back and let us do all the hard work in finding the mortgage advisor with the right expertise for your circumstances. – We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.
*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA.Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.
Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes.
The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.
Pete's presence in the industry as the 'go-to' for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!
Read more about Pete here...