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A flexible mortgage allows you the choice of making mortgage payments according to your convenience. The changing job scenario with short-term contract employment and the grant of performance related bonus has increased the appeal of these mortgages. You may step up or reduce your repayments to suit your circumstances. Lenders have utilised the adaptable nature of the payment procedures of these loans to market them as various kinds of flexible loan products. All flexible loans have some special features.
Lenders permit borrowers to make overpayments for regular loan categories but set limits on the minimum sum you may overpay. These limits may be an amount as high as 500 or 1000 pounds. A borrower may find it difficult to meet this high threshold. Flexible loan lenders do not set such limits and you may make an overpayment by as little as 10 or 20 pounds according to your convenience. Even a small overpayment can save you appreciably in interest.
Lenders adopt the technique of calculating interest on a daily basis for flexible loans as against annual or monthly calculation for ordinary loan categories. Since an overpayment reduces the outstanding loan balance immediately, a daily calculation of the interest lowers it significantly. A borrower with a regular loan may not collect the benefits of lower loan principal until the yearly or monthly recalculation of interest.
Flexible mortgage lenders consent to underpayments of mortgage dues for a limited period. This can be useful, if you need the funds for a major expense. You may even request for a payment holiday for an interval, should you have the need for a break.
The drawdown facility of a flexible mortgage may give you the freedom of access to an overpayment you might have made towards the loan prepayment. The lender holds the overpayment in a separate account and may release the funds when you require them. There may be a constraint on this feature like allowing one withdrawal in a year, up to a fixed sum.
A lender of a flexible mortgage package may agree to ten instalments every year against the normal plan of monthly payments. You may even schedule the time you may make the payments. This can help you to cope with seasonal expenses like those occurring during Christmas. You may organise an instalment when you expect to receive your bonus.