A flexible mortgage is a home loan that allows the borrower to make additional payments on their principal balance without being penalized. This type of mortgage can benefit borrowers who expect a windfall of cash, such as a bonus or inheritance and want to pay their mortgage balance more quickly.
This allows you to customize your monthly payments to meet your specific cash flow needs. This is in addition to the standard variable and fixed rate mortgage options, both of which have penalties for early redemption.
Read on as we discuss flexible mortgages further.
What Are the Various Kinds of Flexible Mortgages?
A flexible mortgage is a type of mortgage loan that allows borrowers to make extra payments, pay off the loan early, or change the loan’s terms. This can be a good option for borrowers who expect their income or financial situation to improve over time.
- Fixed-Rate Flexible Mortgage. A fixed-rate flexible mortgage is when the interest rate is fixed for a certain period but becomes variable. This can be a good option if you want the security of a fixed rate and the flexibility to change your mortgage in the future. The main advantage of a fixed rate flexible mortgage is that it gives you the security of knowing your monthly payments for a set period. This can help you budget more effectively and plan for future interest rate rises.
- Tracker Rate Flexible Mortgage. The main advantage of a tracker rate flexible mortgage is that the interest rate can fall and rise, depending on the external base rate you are following. When the interest rates go down, you will also have lower monthly repayments. The rate is usually at 0.5 percent lower than the standard variable rate, which can significantly affect your monthly repayments.
What Are the Advantages of Flexible Mortgages?
One of the main advantages is that borrowers can make overpayments on their mortgage, which can help reduce the overall amount of interest paid over the life of the loan.
Another advantage of flexible mortgages is allowing borrowers to take payment holidays. This can be useful if borrowers experience a temporary drop in income or need some extra cash for a significant purchase.
Flexible mortgages also offer lower interest rates. This is because lenders view them as being less risky, as borrowers have the option to make overpayments. This can help to reduce the outstanding balance.
Overall, you can save money on interest, pay off your mortgage faster, and build home equity more quickly with flexible mortgages. However, it is essential to remember that they also come with some risks, such as the possibility of rising interest rates. Therefore, weighing the pros and cons before deciding whether a flexible mortgage is a suitable option for you is crucial.
Your Experts at Mortgage by Misty
Flexible mortgages offer many advantages for borrowers. However, there are also some risks associated with flexible mortgages. Make sure you understand all the terms and conditions before you agree to one.
If you are looking for ways to buy a home in Arizona, Mortgages by Misty is here to help. We can help you choose the best mortgage that fits your needs and situation. Contact us now at (480) 618-5358 for details.