the way the world changes today, people really do need to have more flexibility when dealing with mortgages and with borrowing. So keeping this in mind, there are a lot more lenders today that will offer ‘flexible’ mortgages. But flexible can have various meanings in various circles. This article can help you if you have trouble nailing down the difference in mortgages that are supposedly ‘flexible’.
You first need to understand just what this term ‘can’ actually mean. If a mortgage claims to be flexible, then there are some requirements it must meet to qualify as such. There will be these four characteristics involved in a true flexible mortgage:
(1). You can take ‘payment holidays’
(2). You can overpay
(3). You can underpay
If you take advantage of payment holidays, then it’s very similar to underpaying. The difference is that they stop payments for a specific time period. This may sound quite appealing to some, but there are almost always restrictions involved. Lenders won’t just allow the payment holiday, unless you’ve made and overpayment previously. Then once your holiday has passed, you need to overpay once again to get your payments back in balance and caught up. But these holidays are great for the self-employed, or those who simply need a break from the everyday hum-drum that life can become sometimes. Time away from the old grind.
Overpayments give you the ability to overpay and bring down the principle quicker. With any of the traditional mortgages, it’s pretty hard to get them to let you pay over the amount of your required monthly payment. A real flexible mortgage gives you the option of paying what you can. So you can speed up your payment process on paying the loan off. Regularly overpaying can really add up to great savings in interest.
Having the option of underpaying is beneficial as well. But you should always use these sparingly. It you can’t make your monthly payment for any given month, then just pay what you can. This stops any defaults, although penalties will take place. The longer time you underpay, the higher your repayments will be afterwards. So try to watch how you handle that type of situation.
Some other benefits worth mentioning with flexible mortgages is that you are given the benefit of borrowing back some of the money from the mortgage. If you’ve made some overpayments before, but now find yourself needing some cash for some reason, then you can simply borrow back what you overpaid. This will of course change the mortgage terms once again, but obtaining a loan at the same rate of the mortgage can be one of the best rates you can get.
So if you fall into a category of somebody who needs plenty of flexibility in your mortgage financing, then you owe it to yourself to look into finding a good flexible mortgage.