Cheap Flexible Mortgages

Cheap Flexible Mortgages | Just How Cheap Are They?

Red TapeCheap flexible mortgages are what home buyers want. When they're searching for a home, the main concern after securing a flexible mortgage, is how much it's going to cost them. But working this out may not be as simple as it looks. Cheap flexible mortgages are not just about the interest rates, but also about the range of fees and charges at the start and end of the mortgage term. Depending on how you look at it, cheap flexible mortgages can look very different.

Here's an example. In a comparison of cheap flexible mortgages for a home buyer seeking to borrow £100,000 and planning to move within five years, both Yorkshire Building Society and Newcastle Building Society have a range of discounted variable cheap flexible mortgages with a six month initial discount. The initial rate on these cheap flexible mortgages ranges from 0 per cent to 4.39 per cent, with the Yorkshire BS deal at the top of the table. This cheap flexible mortgage deal has a low valuation fee of £290 but can be higher depending on the property value, no higher lending charge and permitted overpayments of up to 10 per cent a year, though there are early redemption charges in the first five years. The true cost over five years is £30,495.

Flexible Mortgages - The APR Test

However, look at the overall cost for comparison, expressed as an annual percentage rate (APR) and the picture changes. The cheap flexible mortgages for our scenario are available at APRs of between 6 per cent and 7.8 per cent. The cheapest of the cheap flexible mortgages in this case is the Hinckley and Rugby variable rate tracker at 1.75 per cent below the lender base rate for the term of the mortgage. There are free legal fees for remortgage customers and there is no higher lending charge. Overpayments and Advertunderpayments are allowed. However underpayments and payment holidays could increase the mortgage term and/or the total amount payable.

With cheap flexible mortgages, the true cost measure includes the fees that home buyers pay up front. These include product fees, arrangement fees and booking fees - whatever they are called, they are the price you pay for getting the mortgage from the bank. The true cost is perhaps the best assessment of how cheap cheap flexible mortgages really are.

Cheap As Chips

Over the five year period in our scenario, the Yorkshire BS deal makes the top of the table in terms of true cost. Instead, the cheapest of the cheap flexible mortgages comes from Norwich and Peterborough, which has neither the lowest initial rate nor the lowest APR. This is a five year discount flexible mortgage with a 1.9 per cent discount off the bank's standard variable rate. It allows overpayments and underpayments. The true cost over five years is £28,161.

As you can see, it's worth looking past initial discounts and doing your sums to find cheap flexible mortgages that really are cheap. By shopping around using our scenario there's a difference of more than £2334 between the deal with the lowest interest rate and the deal that actually is the cheapest. So cheap flexible mortgages do exist, but you'll have to dig around to find them.

Please note that The Offset Mortgage Centre cannot arrange mortgages from Yorkshire Building Society, Newcastle Building Society or the Hinckley & Rugby Building Society.

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