What Is A Flexible Mortgage?

A versatile mortgage is a secured loan that can be repaid in various sums thus giving you access to your home’s equity (within pre-agreed limits). Do you want to learn more? Visit PLAN A Mortgage

A versatile mortgage has five main features: the right to pay off the mortgage early with overpayments or lump sum loans, the ability to repay money back with lump sum withdrawals, make underpayments, and getting payment holidays. A versatile mortgage allows you greater leverage than a conventional mortgage, and the overpayment feature, for example, will save you a lot of money on your mortgage:

Example 1: A £140,000 mortgage with a 6% interest rate and a 25-year period.

The monthly mortgage premium was £902 which was raised by £50 to £952 resulting in a savings of £16,193 and a 22.2 year adjusted mortgage period.

Example 2: A £100,000 mortgage with a 7% interest rate and a 30-year period.

The monthly interest balance was £665 which was raised by £50 to £715 resulting in a savings of £31,193 and a new mortgage period of 24.2 years.

Lump sum transfers will save you a lot of money on your mortgage. For eg, if you have a £150,000 mortgage with a 7% interest rate and a 25-year period, you might save £26,576.81 in interest and 2 years and 10 months in duration if you make a £10,000 lump sum deposit every 5 years. If you paid the £10,000 lump sum payment for a year on the mortgage, you can save £36,949.05 of interest and 3 years and 8 months in total (all figures are approximate).

There are two more opportunities to make extra contributions on the loan for a versatile mortgage:

Save money – the interest rate on a mortgage is typically higher than the interest paid in a typical savings account. As a result, paying off your debt with a 6.9% interest rate is preferable to keeping your funds in a bank account with a 4.3 percent interest rate.

Reduce the capital debt – instead of only covering the interest on the adjustable mortgage, all additional contributions go toward reducing the capital debt; in the beginning, up to 95 percent of your monthly mortgage expenses go into paying the principal, with just a limited portion of the monthly payment going toward the capital debt.

Since there are many varieties of flexible mortgages on the market, a flexible mortgage may be customised to a borrower’s lifestyle and desires. Some flexible mortgages are very stringent, with little underpayment option and restricted recourse to overpayments, while others provide homeowners with tremendous flexibility, allowing them to deposit and remove amounts of any value at any moment.

A versatile mortgage has a higher interest rate than a traditional mortgage, but the main selling advantage is the longer-term interest reduction that can be achieved by allowing overpayments and lump sum loans to get ahead of the payout plan and thereby pay off the mortgage early. In a recent survey of borrowers with adjustable mortgages, 32% said they had used the overpayment function, and 90% said they would do so again. 51% of those who had not rendered overpayments in the past said they planned to do so in the future. Overpayments were made by 69 percent of homeowners for longer than six months, and 87 percent planned to remain overpaying before the debt was paid off. Overpayments is seen by the majority of overpayers as a long-term strategy for paying down their mortgage loans and saving money in the long run.