Know your mortgage: Flexible mortgages

Flexible (sometimes called ‘lifestyle’) mortgages let you make extra repayments when you’re flush with cash, and allow partial payments, or even payment holidays, when you’re a little skint.

There is usually an annual limit to overpayments (around 10% of your total loan) and there may be penalties for exceeding it. Also, to take advantage of any underpayments or payment holidays, you may need to build up a bank of overpayments first.

As the interest on flexible mortgages is generally calculated on a daily basis, overpayments will reduce the balance immediately, so regular overpayments could significantly reduce the term of your mortgage.

However, the flipside is that if you make too many underpayments, or take too many payment holidays, you could end up paying more in interest in the long term.

Note: Traditional mortgages are not as rigid as they once were and many now feature a degree of flexibility. So if you don’t need a dedicated flexible account but would like to make the occasional overpayment/underpayment, it may be worth checking the features of some of the mortgage types already covered.

Next- Part 14: Offset Mortgages