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Flexible mortgages
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What is a flexible mortgage?
A flexible mortgage gives you more options around when and how you can repay than a standard mortgage. Sometimes referred to as a 'flexi mortgage', they could benefit people in certain circumstances, such as:
If you receive a windfall and want to pay off a £10,000 of your mortgage with a lump sum - as you may be able to do so without paying a penalty
If you take a few months off work to travel so have less or no income - as you may be able to arrange not to pay your mortgage payments during that time
If you're on a tracker mortgage deal and interest rates suddenly increase dramatically - as you may be able to switch to a fixed-rate deal fee-free
If your income fluctuates month by month, perhaps if you are self-employed or work on commission - you may be able to increase and decrease your monthly payments as and when you can afford to
Many of the best mortgage deals now include some flexible features - but the benefits vary by deal, so always check the small print to ensure your chosen deal provides the flexibility you need.
How do flexible mortgages work?
Flexible mortgages offer a variety of features designed to appeal to different types of borrowers. These may include any or all of the following:
Larger overpayment without ERCs - most lenders only allow you to overpay your mortgage by 10-20% of the outstanding balance per year before charging ERCs (early repayment charges). A larger overpayment limit can help clear your mortgage more quickly and reduce the amount of interest you pay overall
Underpayment allowances - lets you pay less than the agreed monthly mortgage repayment for a period of time (although these are only by arrangement and usually you'll need to have overpaid previously)
Arranged payment holidays - ability to completely miss one or more mortgage payments penalty-free (although you’ll still have to catch up with these payments before the end of your mortgage term)
Droplock promises - this allows you to switch from a variable deal (tracker mortgage or discount mortgage) to a fixed-rate mortgage without facing early repayment charges. This can be very helpful if interest rates start to shoot up)
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Flexible mortgage rates
The best flexible mortgage rates are generally available to those with the largest deposit and best credit rating, much like any other mortgage. However, if you're looking at flexible mortgage features, then the lowest interest rates may not necessarily make it the best deal for you.
For example, if you're looking for the ability to overpay, but the lowest rate flexible mortgage available to you doesn't offer that feature, then you won't be getting what you want. When comparing flexible mortgages, it's best to look at the terms closely to see which offer the closest to what you want.
It's worth noting that comparing features of different flexible mortgages between different sites may be difficult - as each one is likely to display information differently. A mortgage broker at our award winning broker partner, Mojo Mortgages, will be able to help you compare deals more effectively.
What is a flexible offset mortgage?
An offset mortgage is another type of flexible mortgage, so is often listed as a flexible, rather than offset product. They may also include other flexible features in addition to the ability to offset - although this varies by lender.
‘Offsetting’ your mortgage interest payments against savings held in a linked account means that you'll pay interest on a lower mortgage balance - reducing how much interest you pay overall.
For example: You have a £200,000 mortgage balance and £50,000 in your linked offset account, you’ll only be charged interest on £150,000 of your £200,000 balance
Advantages of a flexible mortgage
Greater freedom to overpay or underpay when you want/need to - which is helpful for those with fluctuating income
May let you take a mortgage payment holiday
Interest is usually calculated daily - which saves you more if you plan to overpay, as interest charges will immediately take account of your new balance after you've made a payment - most mortgages calculate interest monthly or annually
May allow you to switch to a better deal if the interest-rate environment changes
May have a reserve account - some overpayments are held in reserve accounts so that they can be withdrawn at a later date if necessary. This way you don't have to commit to any of the overpayments made on a permanent basis
Disadvantages of a flexible mortgage
Usually has higher interest rates/fees than mortgage deals without flexible features
Not all flexible deals are the same, which can make them harder to compare
May still impose restrictions, such as early repayment charges for very large overpayments
Interest is still charged during mortgage holidays - so payments will usually rise when your mortgage holiday ends to balance this out
Flexible mortgages FAQs
Which lenders offer flexible mortgages?
There are fewer flexible than non-flexible mortgages, although some standard mortgages now include the odd flexible feature too - which means they are not always advertised as flexible.
The Santander flexible offset mortgage is not available at the time of writing, but was advertised as being both flexible and an offset mortgage. Specialist lender Together Mortgages, however, offers unlimited overpayments as standard and does not advertise a flexible mortgage.
A mortgage broker will be able to help you find the flexible feature you're looking for, whether it's advertised or not.
Will I pay more with a flexible mortgage?
You may have to pay a bit more for the added freedom offered by a flexible mortgage - or a mortgage with lots of flexible features. This could be in the form of higher set-up fees and/or a higher interest rate than a standard deal.
However, many of the best mortgage deals offer some flexible features. The trick is to find the mortgage that offers the right combination of cost and flexibility for your needs.
What fees are involved in flexible mortgages?
A flexible mortgage is really just a standard mortgage with additional features, so the types of fees you'll pay should be the same. However, you may have to pay higher fees to access a mortgage with flexible features.
Typical mortgage fees include arrangement fees, valuation fees, and legal fees.
Do flexible mortgages have early repayment charges?
On standard mortgages, early repayment charges, also known as ERCs and redemption penalties, are typically a percentage of your outstanding loan balance.
Although you can often repay more without ERCs on a flexible mortgage, most still impose ERCs at some level, for example, if you want to pay off the majority of your loan in one go during the offer period.
Mortgages with no early repayment fees or charges are rare - but you can usually repay your mortgage in full without penalty if you're on the lender’s SVR (standard variable rate).
What is the difference between a fixed and a flexible mortgage?
Fixed or fixed-rate refers to the interest rate - which cannot change during the offer period if you have a fixed-rate mortgage.
A flexible mortgage refers to certain benefits that mortgage terms offer, so it's possible for a fixed-rate deal to also be a flexible mortgage.
What type of borrower is a flexible mortgage most likely to appeal to?
A flexible mortgage might suit you if you want more freedom of how and when you repay your mortgage loan. This could be particularly helpful for people with a fluctuating income, or who expect an inheritance. However, the features of a flexible mortgage, such as ability to overpay more without charges, or offset the interest, can be appealing to anyone.
Keep in mind, however, that if you're not very well disciplined with your income, it might not be worth it. For example, if you're likely to withdraw all of the overpayments you've made it's unlikely to be worth paying extra for that feature. It's also worth noting that most mortgages allow you to overpay up to 10% of your outstanding balance as standard.
Last updated: 2 August 2023
Uswitch is not a mortgage intermediary and makes introductions to Mojo Mortgages to provide mortgage solutions. Uswitch and Mojo Mortgages are part of the same group of companies. Uswitch Limited is authorised and regulated by the Financial Conduct Authority (FCA) under firm reference number 312850. You can check this on the Financial Services Register by visiting the FCA website. Uswitch Limited is registered in England and Wales (Company No 03612689) The Cooperage, 5 Copper Row, London SE1 2LH. Mojo Mortgages is a trading style of Life's Great Limited which is registered in England and Wales (06246376). Mojo are authorised and regulated by the Financial Conduct Authority and are on the Financial Services Register (478215) Mojo’s registered office is The Cooperage, 5 Copper Row, London, SE1 2LH, and head office is WeWork No. 1 Spinningfields, Quay Street, Manchester, M3 3JE. To contact Mojo by phone, please call 0333 123 0012.