What is a Flexible Mortgage?Written by John Mussi
'Flexible mortgage' is a term that's used a lot, but what exactly does it mean? A flexible mortgage allows borrower to make extra repayments when they have extra money and even reduce or skip payments should need arise. A flexible mortgage allows you to make extra payments to reduce amount outstanding on your mortgage thereby reducing interest you're paying or pay off your mortgage earlier than planned. Imagine being able to save money in mortgage interest, or borrowing enough money pay off your credit cards or personal loans, or buy a new car at a low rate of interest. That's exactly what flexible mortgages enable you to do. Flexible mortgages allow you to save money by cutting length of your mortgage term. You can also buy yourself more time when money is tight by reducing your monthly repayments or increase you mortgage if you need to borrow money. 'Flexible mortgages', also known as 'Australian mortgages' are fast becoming most popular way of taking out a new mortgage. Flexible mortgages are designed for people who want option to vary their mortgage payments to match changes in their cash flow. To varying degrees, they let you underpay, overpay, take payment holidays, pay off lump sums and borrow back overpayments. Flexible mortgages come in various guises but they mainly allow you to make extra lump sum payments, borrow back money, allow you to take repayment holidays and also allow you to make underpayments. Some flexible mortgages will double up as a current account, where your salary is paid in monthly and so you are in effect paying off a huge overdraft. Unlike some traditional loans that still charge mortgage interest on an annual basis, fully flexible mortgages calculate interest daily, which means that any overpayments you make are immediately credited against your loan, thus reducing your interest costs. This gives you flexibility to manage your mortgage payments to suit your cash flow needs as your circumstances change.
| | What is an Offset Mortgage?Written by John Mussi
An offset mortgage is very similar to a current account mortgage - but instead of having everything all in one account, all accounts are held separately. The offset mortgage concept treats your money as one giant pot, with each element (mortgage, savings, current account etc) separate to rest. The result is basically a giant overdraft, although it behaves differently. Offset mortgages are where interest on your mortgage is reduced by funds in both your savings accounts and your current accounts. The more you have in your savings account, less interest you pay on your mortgage, which helps you to repay your mortgage faster and more cheaply in long term. Your part of deal is that you don't receive any interest on your savings or your current account. The interest is work out by taking state of each account separately and offsetting them against others so that you can benefit from your savings and pay less interest. A current account mortgage allows you to benefit in same way, except it also acts a bank account so your salary goes into same account that your mortgage is in. This is slightly different to current account mortgage because your mortgage account is separate from a savings and income account that you open with same company. Like current account mortgage, your income and savings are offset against your mortgage, which reduces what you owe. The interest is calculated on a daily basis on that reduced balance. Offset mortgages work by setting money held in savings and current accounts against your mortgage debt. So instead of earning interest on your cash balances, you pay less interest on your borrowings. The idea of offsetting is that, with less interest to pay, mortgage is paid off more quickly and as a result costs you less. Some of these mortgages can even be linked to your other personal financial commitments and arrangements. One of main attractions of these mortgages is prospect of paying less interest.
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