mortgage-flexible.org.uk
Navigation
The Basics of Flexible Rate Mortgages
By Jon James
Purchasing a new home may prove to be financially taxing with all the rising costs that a prospective homeowner needs to keep up with these days. This is why mortgage lenders and other financial establishments have developed different payment schemes and mortgage rates. Your job as a borrower is to look for the option that will suit your individual needs and financial capabilities. Flexible rate mortgage is one such option that you may want to consider.
What does a flexible rate mortgage entail? A flexible rate mortgage offers just what the name suggests: flexible payments. When purchasing a new home, a flexible mortgage rate will allow you to make a payment according to your financial status. If you have some extra cash handy, then you can make an \'overpayment\' which is in excess of the monthly payment that was previously agreed upon. This way, the outstanding balance will be reduced. The second scenario will be an \'underpayment\' if you are a little short on cash. You can make a payment which is less than the regular monthly payment that is agreed to pay, and the remaining balance may just be added on to your next month\'s mortgage. There are even payment holiday options where you are allowed to not make any payment for a specific period and the outstanding balance will also be added to your next month\'s fees. Finally, there is an amortization schedule for a specific number of years. For example, you can choose from a 15-year or a 30-year amortization schedule, periods by which your entire payment should be completed.
What are the advantages of a flexible rate mortgage? A flexible rate mortgage will give you more control over your finances. For example, if you choose to make overpayments when you have an easier cash flow for your monthly budget, then you can reduce the total mortgage amount and save a significant amount on interest. This way, you can take advantage of payment holidays during the months that you are short on cash, or even borrow back these overpayments.
Another advantage of a flexible rate mortgage is having the ability to underpay. With a fixed rate mortgage loan, you need to come up with a fixed amount of money each month, at a certain deadline, otherwise you would have to pay off late charges and incur more interest. With a flexible rate mortgage, the monthly payment can be reduced and you can just make up for it on your next payment schedule.
All in all, the advantages of a flexible rate mortgage will benefit those who do not have a fixed monthly income, so that they can adjust their monthly payments accordingly.
How can a borrower benefit if the interest can be calculated daily? With a flexible rate mortgage, there is no fixed amount that you have to pay monthly, so the remaining balance of the mortgage will depend on whether you made an overpayment or an underpayment. Because of the variability of the payment amounts, you would need to calculate the remaining interest or mortgage amount on a daily basis, especially if you made an overpayment. This way, you can keep track of the remaining figures.
Is there any downside to a flexible rate mortgage? Just like any other mortgage option, there are disadvantages when choosing a [http://www.simplyfinance.co.uk/Mortgage/Remortgage/Flexible-Rate-Remortgage.html ]flexible rate mortgage. If you are only paying the minimum amount each month, you are not doing yourself a favor because this will just increase the mortgage amount since the principal may or may not be covered, depending on the minimum amount that you are paying. Also, there is a risk of the lender requiring you to refinance or pull the loan, and this may cause you to lose your home if you are unable to fill in the required refinancing amount.
Also, a borrower would need to pay a premium or a fixed monthly add-on cost, to enjoy the benefits of having a flexible payment plan. In the end, however, paying this premium may well be worth it if it means having the freedom to gain control of your finances.
All in all, a flexible rate mortgage would still be your best option if you do not have a fixed monthly income, or if you want to gain more control of your finances through flexible payment options.
Simply Finance
Leave a comment | View Comments
Buying Property News
Housing gloom 'worst in 30 years'
Confidence in the UK housing market fell in March to its lowest point in 30 years, according to a closely watched survey of property surveyors.
Read more...Are the Days of the Greedy Estate Agent Numbered?
NoEstateAgentsPlease.com Closes the Door on Greedy Estate Agents' Fees
Read more...Sell Your Own Home Online | Buy Private Sale Houses | UK Property Market
Allows you to sell your own home online saving thousands in estate agents fees.
Read more...The costs of buying a foreclosed house - Charlotte Observer
The costs of buying a foreclosed house Charlotte Observer Kenneth Harney, who lives in Washington, DC, writes an award-winning column on housing and real estate. Homebuilders are switching tactics and confronting head-on one of their biggest nemeses: foreclosed houses that not only lure buyers away with ... |
Home Economics: Before buying a house, get smart about money - Philadelphia Inquirer
Home Economics: Before buying a house, get smart about money Philadelphia Inquirer But things that seem like a good idea at the time - buying a house, for instance - can go horribly wrong. For evidence of that, just look at the last six years of record foreclosures in this country, which can be attributed to factors as diverse as ... |
