Quick Guide to Flexible, Offset and Other Specialist Mortgages
The choice and diversity of mortgage packages being offered to borrowers has increased dramatically in recent years to cater for the modern mortgage market. Most high street lenders offer some find of flexible or offset mortgage in their product range. Below is a quick guide to some of the main types:
Essentially a flexible mortgage is a secured loan that can be repaid in varying amounts. The interest is calculated on the fluctuations of the outstanding balance and while a flexible mortgage has a higher interest rate, the ability to make overpayments and lump sum payments means the mortgage can be paid off earlier.
Offset mortgages basically use the interest from your savings account against the interest charged on your mortgage. Usually your mortgage provider will combine your mortgage and savings account into a single account. Each month, the amount you owe on your mortgage is reduced by the amount you have in your account, before working out the interest due on the mortgage.
Current Account Mortgages:
Current account mortgages have been around for well over 10 years in the UK and are a type of flexible mortgage. Current account mortgages work by combining your mortgage and current account into a single account, usually with the same financial institution. The balance is calculated daily and the home owner only pays interest on the balance. Any saved income you have in your current account at the end of the month is automatically deducted from the mortgage debt you owe.
A loan for building a home is known as a ‘self-build mortgage,’ and there are several different types of self-build mortgages currently available in the market place. Recently, home buyers who want to build a property for themselves or for investment purposes opted for flexible loans. A self-build mortgage is different from a traditional mortgage. The money is released in stages and to acquire a self-build mortgage, the providers will want to see plans, timescales and the end-value of the property as well as enthusiasm for the project.
Self Cert Offset Mortgage
A self cert counterbalance contract joins the advantage of announcing your own salary with the opportunity of a balance contract that permits over installments, single amount installments, under installments, and installment occasions.
Offset Tracker Mortgages:
Offset tracker mortgages are relatively new in the market place. They combine the benefits of an interest rate that tracks the Bank of England’s base lending rate, with the ability to ‘offset’ the interest earned on savings and current account against the interest charged on the mortgage.
Flexible Tracker Mortgages:
Flexible tracker mortgages offer the benefits of two types of mortgages rolled into one. The mortgage not only offers financial control due to different repayment options, the mortgage interest rates tracks the Bank of England Base Rate.
Cheque Book Mortgage:
A cheque book mortgage main feature is that it is designed to be user friendly. All your savings, debts and mortgage are rolled into one account, with the same financial institution, for easy management of your finances, and the mortgage is flexible, which is an attractive feature for many borrowers.
Discount Offset Mortgage:
A discount offset mortgage is an offset mortgage with a discount on the standard variable rate of interest for a set amount of time.
With such a wide array of mortgage products available it’s important you shop around and seek the advice of an independent mortgage broker. Understand the features, benefits and negative aspects of each option so that you are equipped with the knowledge to select the package that best suits your specific personal circumstances.