What are flexible mortgages?

A flexible mortgage is basically any mortgage that gives you the chance to control how much you pay each month. With traditional mortgages, you pay one rate every month and if you decide to overpay or pay your home off early, you can incur a fee. With a flexible mortgage, you can pay your home off early with no penalties or fees.

Flexible mortgage types

Any type of mortgage can be a flexible one, if the terms allow the borrower to control how much they pay each month. However, there is one type of flexible mortgage that allows the borrower to control how much they pay in interest and allows them to borrow from the funds that they have paid. In the U.S., these types of mortgages are known as mortgage savings accounts, and in the U.K., they are known as offset mortgages. With these mortgages, you put your money in an account, as you would for a regular savings account, and any money in the account is counted towards your mortgage. So, if you have a $100,000 mortgage balance and a $25,000 savings balance, the lender sees your mortgage as having an outstanding balance of $75,000. You only pay interest on your outstanding balance, so you would pay interest on $75,000 instead of $100,000. However, if you need to use the money from the account, you are free to do so. So, if you take $5,000 of that $25,000, the lender now sees your mortgage as having an outstanding balance of $80,000 and that is the amount that you pay interest on.

Flexible mortgage advantages

There are many advantages that come with a flexible mortgage, the biggest of which is that you can pay more towards the home when you have more money, and pay less towards the home when you have less money. This enables those with the means to pay a larger amount each month to pay off their mortgage early. It also allows those with a flexible income to pay what they can. During the good months, they can pay more and during the bad months, they can pay less. Depending on the type of flexible mortgage that you have, you may also be able to borrow from your mortgage funds when you need to or control how much interest you are charged.

Who can benefit?

Flexible mortgages are best for people who don't have a steady monthly income. Their overall yearly income may be able to support the mortgage, but they may not be able to make the same payment every month. This concerns people with jobs in contracting, freelancers, those who own their own business, or anyone else not on a steady salary from an employer.