If you have a changing financial situation then maybe a flexible rate mortgage is for you. This is type of mortgage that will allow you to alter the amount you pay each month, for example if you can overpay or underpay on your repayments or even miss a payment in certain circumstances. You can also borrow money against the money you have already paid to your lender.

One new type of flexible mortgage that is on the market is the current account mortgage that will offset any money that you have in your current account against the outstanding balance of your mortgage. For example if your mortgage is for 110,000 and you have 10,000 in your current account your mortgage interest will worked out for a mortgage of 100,000. This can make you big savings in interest and is useful if you want to obtain a larger mortgage.

These type of flexible rate mortgage commonly known as an offset mortgage can be very useful for high rate tax payers and for people receiving low interest on the savings.

Advantages and disadvantages of getting a flexible rate mortgage

Advantages
Depending on the type of flexible mortgage you have it is generally easier to borrow money against the equity in the property or overpayments you have already made. This is usually at lower interest rate than a normal loan. If you make overpayments continually you could pay off your mortgage a lot faster without incurring any penalties. If the Bank of Englands base rate falls then your lenders standard variable rate will fall too making your repayments smaller. Flexible rate mortgages do not have an early redemption penalty attached to them meaning you can switch mortgage at any time without having to pay a fee.

Disadvantages
If the Bank of Englands base rate raises so will your lenders standard variable rate resulting in your mortgage repayments going up, sometimes dramatically.
As the interest rate fluctuates it can be difficult for you to stick to a budget as your repayments can go up and down. Making underpayments too often can lead to a longer repayment period. You must be disciplined in order to make the repayments and not be tempted to underpay and there are restrictions on how much you can underpay and how many times you can miss repayments.

Flexible Rate Mortgage Advice
For more information about flexible rate mortgages you can visit one of the many mortgage lenders websites than offer flexible mortgages. Alternatively you can speak to an independent mortgage advisor who will be happy to help you choose the right mortgage for your needs.

Jason Haines is a protection and mortgage advisor at godirect.co.uk, one of the UK's most trusted information site about personal finance. So if you are looking for the best remortgage rate why not visit Go Direct and use their free mortgage calculators and online mortgage protection insurance quotation system.

This entry was posted on Tuesday, July 20th, 2010 at 1:51 pm and is filed under Mortgage. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.