UK Flexible Mortgage Guide

Flexible mortgages are a step further down the evolutionary path from the traditional mortgage model in the United Kingdom. These mortgages are adapted to fit the borrower's individual situation. Practically speaking, a flexible mortgage allows the borrower to pay less or more than the required installment. Building up additional payments allows the borrower to take payment holidays, borrow back over-payments and generally allows a lot of payment flexibility as the name suggests.

Under the terms of many flexible mortgage terms, you are able to switch to another type of mortgage without incurring penalty charges. A common feature of flexible mortgages is that interest is calculated daily. Whenever you make a payment you are effectively reducing the interest due on the balance straight away.

Back in 1993, flexible mortgages were trialled successfully in Australia. Mortgage lenders in the UK noted that the product would also fill a gap in the local market, targeting those without regular work patterns.

For the first time borrowers were not lumbered with the rigid structures of fixed payment mortgages, which levied penalties if not enough was paid on an installment or if some of the capital were repaid.

Now flexible mortgages are an accepted part of the mortgage marketplace. They remain unique from other mortgage products in that they allow the borrower to exercise a larger amount of control over his/her finances. The level of flexibility offered by lenders varies considerably, so understand how much you need and read the terms of the products carefully.

One of the most common forms of flexible mortgage is called an offset mortgage. Here your mortgage interest is immediately reduced or offset by the total funds contained in your current accounts and savings accounts. Another step further down the evolutionary track are offset mortgages that also add in loans and credit card balances. This effectively brings down the interest rates on loans and credit cards to the (usually more advantageous) mortgage rate. Combining all the main financial products into one account is a holistic approach that can have dramatic effects on the personal financial situation.