0800 358 5068

Flexible loans are a relatively recent addition to the mortgage market. In order to be classed as fully flexible, a mortgage must calculate interest on a daily basis so any payments are credited immediately. It must also give you the ability to make overpayments without penalty, and to make underpayments or take payment holidays. Crucially for many borrowers, flexible loans allow you to drawdown, or borrow back, from any overpayments that you have made, thereby encouraging a culture of overpaying on your mortgage. This is a highly tax-efficient use of your money, since the savings you make in mortgage interest payments are effectively giving you a tax-free return on your money.

When you pay extra off your mortgage you are effectively earning interest at the mortgage rate, assuming you are paying the standard variable rate, typically about 6.50%. Better still, you would have to earn a gross rate of 11.25% from your savings account (as a higher rate taxpayer) to equal the financial benefit of overpaying on your mortgage. Even the best paying accounts in the country can only offer about half that.

It all amounts to an attractive proposition, but a word of caution. Most people love the sound of flexible loans but in reality end up using very few of the flexible features on offer. Most simply want the ability to overpay and this is available on many other loans, often at cheaper rates.

For the best flexible deals on the market, call one of our expert advisers on 0800 358 5068.