Flexible mortgages allow a large degree of flexibility, both for the repayments and for the cumulative amount of the mortgage. This can be a great bonus for homeowners, but it should be dealt with carefully.
The first thing that should be remembered with flexible mortgages is to keep a good idea of when the mortgage should be paid off and how its reduction should be progressing. The danger with flexible mortgages is that it’s possible to go for years without making much dent on the overall balance. There should be a plan to pay off the mortgage and, while the mortgage balance may be overpaid or underpaid, the overall balance should be reduced each year.
If several years pass where the mortgage balance doesn’t lower on schedule, then plans may need to be readjusted and it may be a good idea to ask why the money is not being paid off.
Sometimes it’s also a good idea to incorporate other loans into the mortgage. Other loans, particularly unsecured loans such as personal loans or credit card debt, will carry a higher interest rate. By incorporating these into the mortgage, the interest rate can be reduced. However, because the mortgage is likely to be active over a longer period of time, the cumulative total amount of interest paid may be higher, and so a flexible mortgage shouldn’t be considered simply a license to borrow.
Tips to make the most of a flexible mortgage.