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What is a Flexible Mortgage - And Who is It Best Suited To?

Is a flexible mortgage the most suitable option for you - and what does it mean? Find everything you need to know about flexible mortgage products and the most appropriate lenders.

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Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin2023-05-09
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What is a Flexible Mortgage - And Who is It Best Suited To?

The Revolution Brokers team receives multiple enquiries from people interested in a flexible mortgage, and the freedom it allows to change and fluctuate your repayments over time.

This guide will explain what a flexible mortgage is and what factors to consider if you are thinking about this type of home loan.

For further information or to enquire, give us a call on 0330 304 3040, or email the team at [email protected].

How is a Flexible Mortgage Different?

A flexible mortgage is a loan secured against your home, but with the option to change how much you pay back each month.

Typical features include:

  • Ability to make over or underpayments.
  • Daily interest calculations.
  • Optional payment holidays.
  • A flexible mortgage savings account.
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How do Over and Underpayments Work on a Flexible Mortgage?

The lender will set a monthly payment value, and you can choose to pay more or less as you wish.

Overpayments mean that you pay back the mortgage faster, and reduce your total interest cost. You can overpay by up to 10% of the outstanding balance on your mortgage in most cases.

You can also pay less, although different lenders will have different rules about how much you can underpay by, and for how long.

Why is Interest Calculated Daily on a Flexible Mortgage?

Given that you can make changes to your payments, within the terms of the contract, a flexible mortgage calculates interest each day rather than each month or year.

The positive is that if you make an additional repayment, your interest costs will immediately drop, rather than waiting until the next month or year to be recalculated.

What Payment Holidays are Available on a Flexible Mortgage?

Payment holidays can be invaluable if you have experienced a drop in income or want to hold onto your planned mortgage repayment value to cover other costs.

In some cases, rules limit a payment holiday up to six months or only allow a payment holiday if you have overpaid by a specific value.

You need to understand that interest continues to accrue while you take a repayment holiday to increase the total interest cost.

What is a Flexible Mortgage Savings Account?

Some flexible mortgage products offer you a savings option, where you can deposit your overpayments but set the funds aside to drawback out again should you wish.

What is Switching in a Flexible Mortgage?

Switching means that you can go back and forth between different flexible mortgage products, without an early repayment penalty or needing to start from scratch with a remortgage.

That could mean switching from a tracker rate to a fixed rate, for example.

What Types of Flexible Mortgage are Available?

There are multiple different forms of flexible mortgage:

  • Flexible repayment mortgages are standard in terms of the term and payment basis but usually give the option to make overpayments or underpayments, or take a payment holiday.
  • Flexible offset mortgages offset your mortgage balance against your savings. Interest is only charged on the net debt remaining.
  • Flexible fixed-rate mortgages used a static interest rate for a set period.
  • Flexible tracker mortgages use a changing interest rate based on the base rate and change it over time with the Bank of England rates.

Switching features are ideal, as they allow you to change between these flexible mortgage types without any penalty, to take advantage of changes to the interest rates on offer.

Is a Flexible Mortgage Calculator Worth Using?

Flexible mortgage calculators are useful and indicate what you can borrow and your standard repayment value.

Each lender has different rates and criteria, so a generic flexible mortgage calculator should only be used to get a very rough idea about your cost of borrowing.

Which UK Lenders Offer the Best Deals on Flexible Mortgages?

Terms available can vary significantly between lenders, so the best way to find a competitive, flexible mortgage is to seek advice from an independent, whole-of-market broker.

Mortgage advisors can recommend any product from any lender, as well as negotiating terms and rates on your behalf.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

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FCA disclaimer

The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.

We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.

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