Are Flexible Mortgages The Right Choice For You?

Flexible mortgages are increasingly popular in the UK. People have reacted to rising house prices and interest rates with the search for greater control over their financial lives. Flexible mortgages can help restore some of that control because their very flexibility makes it easy for people to manage their money in the way that suits them best.

Flexible mortgages come in two main flavours: flexible offset mortgages and current account mortgages. Current account mortgages combine all borrowers' accounts (mortgage, savings, current account, credit card, loans) into one account with a large overdraft or drawdown limit.

With offset flexible mortgages, on the other hand, the accounts remain separate, but linked. All of the credit balances are offset against the debt, so that the borrower pays less interest and can save thousands of pounds over the 25 year mortgage term* .

Borrowers can also look into standard mortgages with flexible features, as these might also be a good option. An offset mortgage broker like the offset mortgage centre will be able to give professional advice.

Flexible Mortgages For Steady Savers

Flexible mortgages of this type work best for people who are steady savers and who will make regular payments, only using the flexibility when they really need it. Couples who put both their salaries into the account will also make great savings. Some people have even asked their parents to put their savings in the account for a short time, so they pay even less in interest and make real inroads into repaying their flexible mortgage.

With flexible mortgages, self-discipline is essential. For example, some lenders encourage borrowers to roll all their debts into the offset mortgage account, effectively consolidating their debts. However, this turns a short term debt into a long term one, so think carefully before taking this step. The main thing for borrowers to remember is that although the mortgage is flexible, they will need to pay it off before they retire, so taking frequent advantage of the borrowing limit may make it difficult to reach that goal.

Flexible Mortgages For Taxpayers

Although flexible mortgages are touted as a good option for higher rate taxpayers, all taxpayers can feel the benefit of flexible mortgage features. Savers usually earn interest on their savings and pay tax of 20 or 40 per cent, depending on their tax status. But if they're not earning interest, then they save the money they would have paid in tax. That's why many illustrations for flexible mortgages include the annual equivalent rate (EAR). This rate is usually the same rate as your flexible mortgage rate, but some illustrations may be even higher using sophisticated calculations to show that taxpayers get more benefit from their savings by choosing to offset with flexible mortgages.

Flexible Mortgages For The Self-Employed

Recent research from the UK National Statistics Office shows that the number of self-employed people is increasing. In January 2008: there were 3.866 million full-time self-employed people in the UK. Flexible mortgages have particular advantages for the self-employed. For a start, those saving for a twice yearly tax bill can link their savings to their flexiblemortgage and reduce the interest paid. They can also take advantage of the flexibility to overpay and underpay, depending on their income level. However underpayments and payment holidays could increase the mortgage term and/or the total amount payable

Whether you're a saver, a taxpayer or are self-employed, flexible mortgages offer some benefits. And there's good news - people with flexible mortgages usually pay them off early, so you could be debt-free eight years before your neighbour is*.

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© 2007 and 2008 Offset Mortgage Centre | Terms and Conditions | Privacy Statement | We don't charge a fee for admistration of an offset mortgage. The Offset Mortgage Centre is the trading name of The Mortgage Broker Ltd, (a whole of market mortgage broker), which is an appointed representative of Home of Choice Limited, which is authorised and regulated by the Financial Services Authority | Your home may be repossessed if you do not keep up repayments on your mortgage. *Source Barclays Bank: Calculation based on an offset tracker product; repayment mortgage of £100,000 over a 25-year term that has been offset with £20,000 savings, resulting in a reduction in mortgage term of 8 years and 8 months or a saving of £44,867 in overall interest. Calculation assumes balance remains constant throughout the life of the mortgage and that the mortgage loan and savings balance will vary. Outcomes will be either a reduction in payments or a reduction in mortgage term. No interest is paid on balances offset against the mortgage. Typical rate is 6.45% (variable). The overall cost for comparison is 6.7% APR.