What is a Flexible Remortgage?

With a flexible remortgage you can vary your remortgage payments to suit your circumstances. If you've got extra cash, you can pay more and pay off your mortgage early and potentially save money. Alternatively, you have the flexibility to take payment holidays, make under payments or borrow money back on occasions when money is tight.

Should I Get a Flexible Remortgage?

If you have a variable income stream or would like to have an emergency reserve of money at hand, a flexible remortgage is a perfect marriage. If you are having financial difficulties and are currently in over your head with debt, a flexible mortgage can make your situation worse. A flexible mortgage will lower your monthly payment by allowing you to make under payments, the amount you save each time you make an underpayment gets added back to the balance of your loan, thus creating more debt. It does not make the mortgage more affordable, but allows you to spread out your payments over a period of time. Please also be aware that there is a limit to the amount of underpayments you can make, at one point you will be required to pay back the underpayments with accumulated interest. Our advice, if you are looking for a loan program that will give you flexibility in an extraordinary situation, a flexible remortgage is a good idea. But if you are looking at a flexible remortgage to make your dream home affordable, a nightmare will surely follow to haunt you.

Discount Remortgage: An Alternative to a Flexible Remortgage

Many people turn to a flexible remortgage when they are having financial difficulties which may not be the best route to take. An alternative to a flexible remortgage is a discount remortgage. A discount remortgage saves you money in the early years by giving you a discount off the standard variable mortgage rate, usually up to 5 years. If you want to keep your monthly repayments at a lower level for a couple of year until you get back on your feet, a discount remortgage could be right for you.

Flexible Offset Remortgage vs. Flexible Current Account Remortgage

Flexible mortgages come in two main flavors: 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.

Tax Advantages of Flexible Mortgages

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.