FLEXIBLE MORTGAGES

Flexible mortgages fall into two main categories - Flexible Payments and Offsetting.

Flexible Payments

The main feature of flexible mortgage products is that they will allow over payments, either as a lump sum and/or additional payments each month.

Interest is usually calculated daily rather than being applied monthly or yearly. This means that when an over payment is made the amount of interest you pay will be reduced due to a lower mortgage balance.

This can make quite a big difference to how much you pay in interest over the course of the mortgage and will allow you to pay the mortgage off early or reduce your monthly payments. 

You can often draw down the over payments you have overpaid if you need the money in the future, meaning you do not need to refinance within your mortgage overpayment limits.

Offsetting

With an offset mortgage your savings and current account are linked to your mortgage account. Any money in your savings account and/or your current account are offset against your mortgage account and you are only charged interest on the outstanding balance.

For example, if you have a £100,000 mortgage and £5,000 in your savings account, you will only be charged interest on £95,000.

The interest is calculated daily, so you only ever pay interest on the actual amount outstanding on the mortgage. Over a period of time this will save you a lot of interest and could reduce the term of the loan.

1 STOP Financial Services can help see if a Flexible or Offsetting mortgage is suitable for you. Why not contact us, one of our advisers will be pleased to help you.