Flexible Mortgage
The term flexible mortgage describes a particular type of mortgage that is available to residents of Australia and the United Kingdom. It is unusual because it allows people to make overpayments on their loan which is something not typically allowed when you take out a normal mortgage. Yet another benefit of the flexible mortgage is that you can take out any money that you put into the loan. If you need to you can withdraw from it in a process that is called redrawing.
Perhaps the most unique thing about a flexible mortgage is that you can actual pay less then you have agreed to every month. This is called underpaying. You can also take something called a payment holiday when you take out a flexible mortgage. Typically this can stop you from having to make payments for up to three to twelve months.
The flexible mortgage is a godsend to many individuals who otherwise would not be able to afford a house. The flexible mortgage is very adaptable to a person's individual needs and it accommodates surprises in life such as medical emergencies, the need to move or the birth of a child. No wonder the flexible mortgage is becoming one of the most popular forms of mortgage in the United Kingdom. It allows you full "draw down" of the loan at any time and to the end of the loan if you need it. A similar arrangement is also possible with a kind of mortgage called the offset mortgage.
The flexible mortgage also suits individuals who are paid more erratically or who are paid by commission. For instance if your income is through royalties or commissions then you can make overpayments on your flexible mortgage loan when you are flush and reduce your payments when business is slow. The flexible mortgage is a boon for freelancers and entrepreneurs who may have trouble making the payments on a regular mortgage.
With traditional mortgages, borrowers often face large penalties for additional capital repayments or if payments were not made on time. There are no penalties; negative credit marks if you pay late on a flexible mortgage.
The flexible mortgage is a newer lender product. It was first successfully introduced in Australia in the early 1990's and for the longest time the flexible mortgage was actually nicknamed the Australian mortgage. It was first introduced to the United Kingdom in 1995.
The flexible mortgage has also mutated into another common type of mortgage in the U.K. called the offset mortgage, which is used mainly to purchase domestic property. An offset mortgage allows the borrower to reduce the interest charged by placing a credit balance against the debt of the mortgage. For example, if the mortgage balance is £200,000 and the credit balance is £50,000, interest is only charged on the net balance of £150,000.
Both the flexible mortgage and the offset mortgage are ideal for what lenders and banks call undisciplined borrowers. In the offset type the limit of the credit may be reviewed occasionally to make sure it is in line with ensuring the capital repayment of the mortgage.
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