Flexible mortgages are basically a standard mortgage that has some additional features. So for those of you who were hoping that flexibility meant taking a break from your financial commitments every now and then or paying off your mortgage at your leisure, then we are sorry to inform you that this is not the case. What a flexible mortgage does mean, however, is that you get a mortgage that comes with features that make your money work for you.
How Does a Flexible Mortgage Work?
Basically, when you take out a mortgage you will be asked if you want to have additional features. These additional features are optional extras that you elect to have. But, you need to mindful that if you elect to take advantage of these features then your lender may charge you a slightly higher interest rate or higher ongoing fees to maintain your mortgage. These additional costs are usually negligible, but you need to ask what fees are associated and then weigh-up whether or not these costs are worthwhile or if you’ll use the features frequently. If not, then you may be better off taking out a standard, no frills mortgage with reduced costs.
What Features Does a Flexible Mortgage Come With?
This feature allows you to pay more off your mortgage than the minimum monthly repayment that is due. Over time, the additional amounts you repay accumulate, and you can then borrow this money for other purposes.
How your money works for you: The additional money you pay off your mortgage reduces your interest payment and the overall term of your loan. Depending on how much you pay, this can shave thousands of dollars off your mortgage and years off your mortgage term.
Interest Calculated Daily
Daily interest is the least expensive method of mortgage interest calculation, when compared to monthly and yearly approaches.
How your money works for you: If you elect to make extra mortgage repayments and your interest is calculated daily, then the amount you pay will reduce the interest that is paid on the next day of calculation. This means that extra payments have an immediate financial impact on your mortgage.
This is a transaction account that is directly linked to your mortgage. Basically, the balance of your transaction account is offset daily against your outstanding mortgage balance, which then reduces the amount of interest that you pay.
How your money works for you: If you keep a constant balance in your offset account for the term of your loan you will reduce your loan term and the amount of interest you pay. For instance, a constant balance of $10,000 in your mortgage account when you have a $150,000 mortgage could shave 3 years and 8 months off your mortgage term and see your repayments reduced by $38,636.95.
Want to know more about how you can make your money work for you? Then don’t waste another minute, contact eChoice NOW find out how you can save today.
Written by eChoice