The flexible mortgage originated from Australia and was introduced into the UK around the late 90s.
Most people were slow to switch as old habits die hard and the flexible mortgage is a complex product that customer need to understand before they are able to make the product work to its full potential.
Banks were reluctant to change as the flexible mortgage used correctly places the customer in an advantageous position.
There are many different types of flexible mortgages which are generally indicated by the degree of flexibility built into each product.
The characteristics for a true flexible mortgage are that they should possess daily interest, over and under payment, payment holidays, no early penalty charge, set rate over the base rate and over payment limit.
Rates of the flexible mortgage as the product has matured has now dropped to very competitive rates.
Most mortgage products have at least some limited flexible features.
They are ideal for people with varying incomes for example the self employed. Or for people whom have savings and looking for a guaranteed safe tax free saving scheme that will reduce the term of their mortgage. Higher rate payers will benefit the most.
Regular over payments will offset the mortgage and also reduce the mortgage term. The net result of a client placing savings in the mortgage account and making regular over payments will mean saving potentially thousands off their mortgage by paying less interest.
The sooner a customer is able to pay off a mortgage the less interest they will pay.
A customer can initially start a long term repayment mortgage, which would reduce the monthly payments and plan that when there is surplus cash to make over payments, this again will mean saving potentially thousands off their mortgage.
