Flexible mortgage

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The term flexible mortgage refers to a UK residential mortgage that offers flexibility in the requirements to make monthly repayments.

Typical features include the facility:

to make overpayments (more than the normal amount)
to redraw (borrow back) any previous overpayments
to underpay - less than the normal amount
to take a payment holiday - stop repayments for a period, typically 3 to 12 months.

These features allow a flexible mortgage to be adaptable to individual circumstances. This is especially useful for self employed borrowers and those with a variable income. By way of example, borrowers whose income includes a significant but irregular commission component might make use of commission payments to make overpayments, thereby reducing the term or enabling them to underpay at other times.

With traditional mortgages, borrowers often face large penalties for additional capital repayments or if payments were not made on time.

[edit] History

The flexible mortgage was first successfully introduced in Australia in the early 1990’s leading to the phrase Australian mortgage being used to describe this type of arrangement.

The concept was imported into the UK in 1995.