As the mortgage market has increased and lenders have become more competitive, new products have been introduced and borrowers are now offered a wider variety of products. One of the most recent types of mortgage to be introduced to the market is the Flexible Mortgage. This type of mortgage provides you with a choice of how to make your mortgage payments.

The key point to a flexible mortgage is that it provides you with the flexibility of monthly payments. You have the choice to be able to make overpayments in addition to your agreed monthly mortgage repayment. Although, the lender might impose a limit on how much you can overpay by per month. Therefore, if this is a key factor to you, you should research this part thoroughly before you commit to the agreed mortgage. A flexible mortgage operates particularly well for people who work in a job that pays monthly or annual bonuses. If you fall into this category, you can use these one off lump sums to make overpayments to your mortgage. Another point is that you can take payment holidays; this is where you can effectively miss your monthly mortgage payments. Self-employed people benefit from this aspect as your workload is not guaranteed and you therefore have the option of making overpayments when business is good and missing monthly payments when work isn’t so heavy.

The other major factor with a flexible mortgage is the interest rate, whichever interest rate option you choose, the lender will charge interest on a daily basis rather then annually. Therefore, you should see the balance of your mortgage loan decreasing on a daily basis as the interest is calculated on the balance outstanding. Most lenders can offer fixed, variable and discounted rate options on flexible mortgages.

When utilising the overpayments and lump sum payments options of the flexible mortgage, there should be no penalties incurred for doing so. Lenders might set maximum limits on how much you can overpay by per month and they may also impose restrictions on lump sum payments to a certain amount; however, this again depends on individual lenders. If you use the service of making monthly overpayments or a one off lump sum, this will reduce your overall mortgage balance. Therefore, you are decreasing the amount of mortgage you owe to the lender and will eventually reduce the term of the mortgage.

If you are making regular overpayments, you will then also have the option of borrowing back these funds if required. Using this method can also be seen as a way of saving, therefore, not only are you reducing the loan balance but you are also building up a reserve of savings. These can be borrowed back at any time and you are effectively borrowing back from yourself. You are encouraged to make overpayments in order for you to use this service. However, each lender stipulates various guidelines with regards to this method and it’s best to check with individual lenders regarding their rules on this.

When considering a Flexible Mortgage, it’s worth researching various lenders. Lenders are able to compete against each other for business by offering lower interest rates and various repayment options. Therefore, it can be beneficial to meet with your existing lender to discuss your options before making a final decision on which lender to use. If you existing lender is unable to provide you with the assistance you require, you can contact an independent financial advisor who will be able to give you impartial advice about the relevant deals that are best suitable for your needs.