07:18 29 June 2013
A flexible mortgage is the exact opposite of fixed mortgage. This one will allow you to make extra payments if you want to pay the loan right away. It will also allow you to reduce or even skip monthly payments if your budget gets too tight. However, you will need to build reserve through overpayments before you are allowed to skip payments.
A flexible mortgage is linked to a savings or current account held with the lender. These accounts are usually used by the lenders to offset the interest. For example, if the mortgage balance is £50,000 and the borrower has £2,000 held in their account, the customer is charged mortgage interest on £48,000.
The interest rate in flexible mortgage is calculated on a daily basis. As the overpayment reduces the mortgage balance immediately, the borrower will be charged less interest the next day. Any overpayment can also reduce the mortgage terms by months or even years.
The benefits that come with flexible mortgage, such as cash back and discounts, are also offered on other types of mortgage. This is done by lenders so they can attract more business.
Some lenders also offer free legal or at least contributions towards conveyance costs especially to qualified borrowers who have great credit score.
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