SimplyFinance - Flexible Rate Remortgage

The Basics of Flexible Rate Mortgages

2007-08-06T23:00:00Z

Purchasing a new home may prove to be financially taxing with all the rising costs that a prospective homeowner needs to keep up with these days. This is why mortgage lenders and other financial establishments have developed different payment schemes and mortgage rates. Your job as a borrower is to look for the option that will suit your individual needs and financial capabilities. Flexible rate mortgage is one such option that you may want to consider.

What does a flexible rate mortgage entail? A flexible rate mortgage offers just what the name suggests: flexible payments. When purchasing a new home, a flexible mortgage rate will allow you to make a payment according to your financial status. If you have some extra cash handy, then you can make an 'overpayment' which is in excess of the monthly payment that was previously agreed upon. This way, the outstanding balance will be reduced. The second scenario will be an 'underpayment' if you are a little short on cash. You can make a payment which is less than the regular monthly payment that is agreed to pay, and the remaining balance may just be added on to your next month's mortgage. There are even payment holiday options where you are allowed to not make any payment for a specific period and the outstanding balance will also be added to your next month's fees. Finally, there is an amortization schedule for a specific number of years. For example, you can choose from a 15-year or a 30-year amortization schedule, periods by which your entire payment should be completed.

What are the advantages of a flexible rate mortgage? A flexible rate mortgage will give you more control over your finances. For example, if you choose to make overpayments when you have an easier cash flow for your monthly budget, then you can reduce the total mortgage amount and save a significant amount on interest. This way, you can take advantage of payment holidays during the months that you are short on cash, or even borrow back these overpayments.

Another advantage of a flexible rate mortgage is having the ability to underpay. With a fixed mortgage loan, you need to come up with a fixed amount of money each month, at a certain deadline, otherwise you would have to pay off late charges and incur more interest. With a flexible rate mortgage, the monthly payment can be reduced and you can just make up for it on your next payment schedule.

All in all, the advantages of a flexible rate mortgage will benefit those who do not have a fixed monthly income, so that they can adjust their monthly payments accordingly.

How can a borrower benefit if the interest can be calculated daily? With a flexible rate mortgage, there is no fixed amount that you have to pay monthly, so the remaining balance of the mortgage will depend on whether you made an overpayment or an underpayment. Because of the variability of the payment amounts, you would need to calculate the remaining interest or mortgage amount on a daily basis, especially if you made an overpayment. This way, you can keep track of the remaining figures.

Is there any downside to a flexible rate mortgage? Just like any other mortgage option, there are disadvantages when choosing a flexible rate mortgage. If you are only paying the minimum amount each month, you are not doing yourself a favor because this will just increase the mortgage amount since the principal may or may not be covered, depending on the minimum amount that you are paying. Also, there is a risk of the lender requiring you to refinance or pull the loan, and this may cause you to lose your home if you are unable to fill in the required refinancing amount.

Also, a borrower would need to pay a premium or a fixed monthly add-on cost, to enjoy the benefits of having a flexible payment plan. In the end, however, paying this premium may well be worth it if it means having the freedom to gain control of your finances.

All in all, a flexible rate mortgage would still be your best option if you do not have a fixed monthly income, or if you want to gain more control of your finances through flexible payment options.

If a flexible rate mortgage sounds like something that might interest you, fill out our short form, and a SimplyFinance representative will put you in contact with the best mortgage lender for you. The lender will answer any questions you may have concerning your mortgage, and they'll hunt to find the best possible flexible rate mortgage deal for you.

CLICK HERE TO APPLY FOR A FLEXIBLE RATE MORTGAGE TODAY!

Relevant Articles

Shoping for Flexible Rate Mortgages

Pros and Cons of Flexible Rate Mortgage

Shopping for Flexible Rate Mortgages

2007-08-07T23:00:00Z

A lot of people say that a flexible rate mortgage is one of the riskiest options that a borrower can choose. With a flexible rate mortgage, you have the ability to make an overpayment, an underpayment or even take 'vacations' from paying your mortgage's monthly fees. A lot of websites and mortgage lenders recommend a flexible rate mortgage that you can use to pay off your loan earlier than the allotted time by making overpayments. Here, you will be shelling out an amount which is greater than the pre-agreed monthly premium. You just need to know which option will best suit you, and you need to be aware of the consequences of each financial decision that you will make.

First, here are some tips on how you can make a flexible rate mortgage work to your advantage:

Be aware of the prime rate. If the prime rate is trending upward, then you may need to lock in your rates or refinance to a fixed rate mortgage so that the fees will not skyrocket.

Always read the fine print before getting into an agreement. Just like with any contract, you need to always be aware of the details about the terms and conditions written in fine print. This is one mistake that a lot of people make, so be sure that you understand everything – like how much the remaining mortgage principal will amount to if you make either an overpayment or an underpayment, and other pertinent details.

If the flexibility options or the conditions sound really complicated, then it probably is. Flexible rate mortgages can save you a significant amount of interest, but they may also lead to a financial crisis if not handled properly. Thus, you need to know exactly what you are getting into before agreeing to a flexible rate mortgage.

What is the best way to shop for flexible rate mortgage? Print, television and radio advertisements are some of the mediums by which you can get a hold of a contact person when choosing flexible rate mortgages. Make sure that the financial establishment is reputable before entering any agreement. This will also give you an idea of the status of the real estate/mortgage market in your area.

Mortgage brokers or referrals from friends and family are other ways to shop for flexible rate mortgages. A local broker in your area would know the ins and outs of the real estate business, and they would have the necessary skill and experience in looking for the best flexible rate mortgage that will best suit your financial needs. Word of mouth is also a good source of referral, so you can ask your friends and relatives if they know of a reputable firm who can give you a good flexible rate mortgage option.

If you don't want to spend a lot of time and energy shopping around for the best flexible rate mortgage, take a minute to fill out our simple form, and a representative of SimplyFinance will do the searching for you. They will match you with the best flexible rate mortgage broker for your particular circumstances, and this broker will answer any questions you may have before they get you the best flexible rate mortgage deal out there.

What risks should I be aware of when shopping for flexible rate mortgages? When shopping online for flexible rate mortgages, be aware of all the terms and conditions and read the 'small' print, which is like the fine print when the contract is printed on paper. There may be conditions about the flexible rate mortgages that you are not aware of, just like with any other online promos, so it helps to be aware of these things in advance.

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Pros and Cons of Flexible Rate Mortgages

2007-08-07T23:00:00Z

Fixed rate mortgage versus flexible rate mortgage? Most people know what a fixed rate mortgage is: a type of mortgage where you need to pay a fixed interest rate each month to pay off your home loan for a specified period. This is one of the most popular types of home loan payment options since borrowers feel secure in the fact that their monthly interest rate will not change through the course of time that the loan is being paid. Aside from a fixed rate mortgage, there is also the flexible rate mortgage where the borrower is given more leeway when it comes to the amount of payment to be made for the monthly premiums. A person can pay more than the allotted monthly premium, or less than the pre-agreed amount – depending on his or her current financial status. With a flexible rate mortgage, a loan can be paid off in advance by making 'overpayments', thereby saving the borrower a significant amount of money in interest rates.

What are the advantages of flexible rate mortgages? Overpayment: With a flexible rate mortgage, a borrower can pay more than the required monthly premium without paying a penalty or an additional charge. This is especially helpful for those who are working on commission or those who do not have a fixed monthly income. If you have the extra cash, you can make an overpayment which will be credited against your loan amount. This way, if you make a lot of overpayments, you will eventually save a significant amount on interest costs and the total amount of debt will be easily reduced.

Payment reduction or underpayment: Borrowers who are not earning a fixed amount every month or those who are temporarily out of work can benefit from a payment reduction or underpayment for flexible rate mortgages. With a flexible rate mortgage, you will be allowed to pay only a minimum amount against the monthly premium. This is part of the freedom given to a borrower who undertakes a flexible rate mortgage plan.

Payment holiday or payment vacation: In case you have a foundation of several overpayments over a continuous period and you suddenly experience cash shortage, you can use these overpayments to cover a month or two of payment holiday or payment vacation, where you do not need to make any payments at all. The good thing about flexible rate mortgages is that you are not required to pay any penalties in case you will be making an underpayment.

Borrowing of funds against the capital repaid or any overpayments: This is also one advantage of flexible rate mortgages. In case you have made several overpayments, you can even borrow money against the capital repaid or any overpayments that you have made if you need to do so.

What are the disadvantages of flexible rate mortgages? If there are several months where you are only paying the minimum amount, your loan period may be extended. This can also lead to your interest rates blowing up to an extreme amount, so you need to be careful when making payments for the minimum amount only. You should only make underpayments or skip payments for your mortgage in case of financial emergencies. Or, you can build up on the months where you are earning extra cash and make as much of an overpayment as you can so that this will be your antidote for the financially unstable months.

How are daily interest calculators used for flexible rate mortgages? Because of the fact that there are times when the borrower is paying more than the intended monthly premium, the calculations of the remaining loan capital and interest rate will be different. This is the beauty of flexible rate mortgages, if you are making a lot of overpayments, the loan will be fully paid in no time at all. On the other hand, if you have months where you can only pay the minimum monthly premium, the calculations will be different. This is the reason why a lot of web sites have a daily interest calculator, which is extremely useful in computing for the rest of the loan amount, no matter which type of flexible rate payment you have made for the month.

If you decide that a flexible rate mortgage is the best mortgage option for you, take a moment to fill out our short and simple form. Once you've done so, a SimplyFinance representative will introduce you to a flexible rate mortgage broker. Your broker will answer any questions you have about flexible rate mortgages, and they will search the market to find the best flexible rate mortgage for you and your particular financial circumstances.

CLICK HERE TO APPLY FOR A MORTGAGE TODAY!