If there’s one thing that the last few years should have taught us all it’s the benefit of having flexibility built into your financial products, because there’s no way of telling what unfortunate event could be coming down the line towards us.
Thankfully, when it comes to home mortgages many standard deals now have added flexibility built into them, and you can go to a high street bank like Santander to get these deals instead of having to rely on expensive niche providers. However, in many situations you will have to pay a little more for having additional flexibility, so the key is working out exactly what you need.
The most common flexible feature is the possibility of making early repayments. Some mortgage providers will charge you for trying to pay back your mortgage quicker (on the basis that it saves you interest over the entire term of the mortgage), others will allow you to pay back £250 a month, others 10% of the value of the mortgage a year.
Ultimately, you have to decide what is realistic. As you have to pay a higher rate the more flexibility you have, it may well be worth erring on the side of caution and should your financial circumstances drastically improve you can always remortgage, or put that money to one side and pay off your mortgage as fast as you can.
Another option that is occasionally available is to talk to your lender and put repayments in a separate pot. This way it is considered to have been “paid off” early, but remains available if you need to take it back, or if you have to miss a payment (though there may be penalties).
A final option is to look at one of the hybrid deals, which puts your mortgage and your savings (for example) together, this way you can essentially pay off your mortgage more quickly if the opportunity arises, but get penalised less for doing so (though the rates are higher).
Sometimes you may need to miss a monthly repayment, and you wouldn’t think that this would be a problem bearing in mind you will make 300 monthly repayments over the course of a mortgage. Usually your lender will let you get away with one or two, but you could get penalised in the form of accrued interest. If you have decent savings, you should never have to miss a repayment, and that way avoid the problem altogether, but if not, it might be worth trying to get a deal with a lender who won’t penalise you too harshly should you happen to miss a repayment.
Mortgages are the most important financial product you will ever get, so whilst there is a lot of free information around, you should never be afraid to consult some independent financial advice, a good advisor may well find you a deal (or offer some guidance) that will save you much more money over the life of your mortgage than you would pay for a consultation.
Flexible Home Mortgage