Flexible Mortgages

Brief overview of the Flexible Mortgage

Flexible Mortgages originated in the mid 1990’s when it was referred to as an Australian Mortgage, where the bank or lender began to let the customer make extra payments into their account.  This had a massive impact on how interest on the account was calculated and it changed from yearly to daily. It has developed into what is now known as a Flexible Mortgage.

Some of the typical features of a Flexible Mortgage product are:

• the ability to make overpayments
• the ability to make underpayments
• interest is calculated on a daily basis
• the customer can take a payment holiday
• the customer can borrow back their overpayments
• draw-down additional funds up to pre-set limits
• can pay a lump sum off the capital balance

The benefits are quite obvious by the main features listed and the fact that borrower has a good level of control over their account and finances, and adapt it depending on their current lifestyle.  It can be used in conjunction with either an interest only or repayment mortgage.  The down side is that a Flexible Mortgage can have higher setup fees than a standard mortgage.  Always check fees with your mortgage broker.

An important point to make however is that a Flexible Mortgage is not a single defined mortgage and has two main variations.  I’ll post these soon…