Flexible mortgage features include overpayments, underpayments, payment holidays, switching and daily calculated interest.

Overpayments
Overpaying on your mortgage is widely recommended, but only if you’re in a position to do so. This is because overpayments come off the capital, so you could save money on interest and shave years off your mortgage. This can be paid either as a lump sum or as an increase to your monthly payment(s).

When a mortgage has flexible features, you have more freedom to overpay without worrying about paying a penalty. However, some mortgages may have a limit on how much you can overpay each year (usually 10% of the balance). So, you should always check your mortgage’s terms and conditions before making any payment changes.

Underpayments
​​On the flip side of overpayments, a more flexible mortgage will enable you to underpay by a set amount. This is particularly useful if you have a fluctuating income, or find yourself in a situation where your outgoings surpass your income.

As with overpayments, mortgages can vary and there may be limitations on how much you can underpay and when. For example, underpayments are usually only allowed if there has been a previous overpayment to balance it out. With this in mind, remember to always check your mortgage terms before scheduling an underpayment.

Daily interest calculations
Any overpayments, underpayments or payment breaks are taken into account immediately. For this reason, mortgages that are considered flexible will usually calculate your interest daily, rather than monthly or yearly. This is particularly useful if you’ve made regular overpayments, as you could see a swift reduction in your interest charges.

Payment holidays
Life can be unpredictable and sometimes we just need a little extra help. Payment holidays have become increasingly popular since the pandemic - a prime example of unavoidable circumstances. Some mortgages allow for these situations by giving you time to get back on your feet.

It’s important to note that some mortgages may require you to have overpaid previously to benefit from a break. You may even need to make a certain amount of payments before you’re eligible for a mortgage holiday.

When considering a payment holiday, you should also factor in the interest you’ll accrue during that time. So only take a payment holiday if it’s absolutely necessary.

Switching
If your mortgage is more on the flexible side, you can usually switch between various types of mortgages without having to pay early repayment fees or submitting a complete remortgage application.

There isn’t a ‘flexible mortgage’ product per se, but rather different types that fall under the ‘flexible mortgage’ umbrella. This includes flexible repayment mortgages, offset mortgages, fixed-rate mortgages and tracker mortgages.

Flexible repayment mortgages
Flexible repayment mortgages work much like a ‘typical’ repayment mortgage. The difference is that you have more flexibility on whether you can overpay, underpay or take a mortgage holiday. Usually, there would be no risk of penalty fees, such as early repayment charges.

Flexible offset mortgages
Flexible offset mortgages allow you to reduce the amount of monthly interest by using your savings. For example, if you have £10,000 in savings and a mortgage of £150,000, then you would only pay interest on £140,000. This could take years off your mortgage!

Flexible fixed-rate mortgages
Like a traditional fixed mortgage, flexible fixed-rate mortgages offer you a fixed rate for a fixed term. Plus, as a bonus, you can adjust your monthly repayments depending on your financial circumstances.

Flexible tracker mortgages
Flexible tracker mortgages work in the same way as a standard tracker mortgage. By this, we mean that they track the Bank of England's base rate and adjust your interest rate accordingly. With a tracker mortgage, your mortgage repayments could change every month.  The only difference between this and a traditional tracker mortgage is the addition of flexible payment features.

Mortgages that offer a little more flexibility are growing in popularity due to the peace of mind that comes with having flexible payment terms in place. This type of mortgage typically appeals to those on a fluctuating income, such as:

• Self-employed borrowers
• Borrowers with a commission-based income
• Those on zero-hour contracts

If your circumstances would suit a more flexible mortgage product, get in touch with our team for honest advice about your mortgage options. You can also find more information about self-employed mortgages in our self-employed FAQs and mortgage guide.

Whilst having flexibility in your mortgage terms may seem like the obvious choice, there are benefits to traditional mortgages as well. Generally, it comes down to your individual situation on whether you're better suited to a ‘flexible’ or a ‘traditional’ mortgage.

For example, traditional mortgages will typically have lower interest rates. This means you don’t want to take out a flexible mortgage to act solely as a safety net. If you’re unlikely to use the flexible features, then you could just end up paying more in the long term.

More flexibility can also be a bad fit if you’re not disciplined with your money. Flexible mortgage features generally work best if your overpayments outweigh both your underpayments and any payment holidays. If you’re likely to keep taking back the money you overpay, then a traditional mortgage would be a more cost-effective option.