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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:
Flexible Mortgages
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
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.
Flexible Loans
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 offset mortgage combines the benefit of declaring your own income with the freedom of an offset mortgage that allows over payments, lump sum payments, under payments, and payment holidays.
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.
