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Flexible rate mortgages
Flexible Rate Mortgages

A flexible rate mortgage is a home loan that enables you to control and manage your monthly mortgage repayments. It is also called a flexible mortgage.

Flexible rate mortgages are ideal for the self-employed, contract workers, workers on short-term contracts, freelancers, part-time workers, people in changeable employment, and borrowers that need more mortgage flexibility.

What flexible rate mortgages are offered?

Flexible mortgages can be based on all standard mortgage types. Some lenders may offer introductory deals such as fixed, variable, capped, and discounted rates. If you are fortunate enough to secure a special deal, you will normally tack the discount on top of a standard variable rate or tracker deal for a pre-agreed period of time.

How do flexible rate mortgages work?

  • Generally, standard borrowing terms apply to flexible rate mortgages. You will be allowed to borrow 3 to 4 times a single income and 2.5 to 3 times a combined income.

  • The flexible nature of flexible mortgages does allow many lenders some breathing space making it possible to arrange self-certification borrowings or to borrow 100% or more of your property value.

  • As with other standard mortgages, a deposit of 5% of your property’s value is required. If you take out a 100% mortgage, no deposit is necessary.

What are the benefits of flexible rate mortgages?

The key advantage of a flexible rate mortgage is the freedom and scope it allows the borrower.

Flexible mortgages enable you to take control of how you repay your home loan. For instance, you can choose to make over-payments and under-payments as dictated by your financial circumstances at any given time without being penalised. You will also be offered certain bonuses such as repayment holidays.

Moreover, as interest is generally calculated on a daily basis rather than annually, making an overpayment during a certain month or months will have an immediate effect on your mortgage balance. Flexible mortgages suit borrowers such as the self-employed and contract workers who may otherwise find it difficult to prove their income, and therefore obtain a standard non-flexible mortgage.

Some important considerations of flexible mortgages

Certain lenders of flexible mortgages impose rules and restrictions. As an example, you may find that you are only allowed to take a repayment holiday or make an underpayment if you have built up enough ‘credit’. Another restriction may govern how many times you are permitted to make use of these special bonuses or ‘add-ons’ over a period of one year.

Make sure you do not fall behind in your repayments. If you are not responsible, the flexible nature of your mortgage may eventually cause you financial problems. Flexible rate mortgages tend to have higher interest rates; you are essentially paying for the convenience of having flexibility!

Check out the best mortgage providers

 
 
 
 
 
 
 
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