Lifestyle Mortgages — The New Kid on the Block

Financial flexibility is becoming increasingly popular with consumers due to many mortgage lenders offering new types of flexible mortgages, or ‘lifestyle’ mortgages as they’re often known. The idea of having your mortgage, current and savings accounts tied together in the one place can make looking after your money simpler than ever before. So what do these new types of mortgages offer that the traditional ones don’t?

One of the key areas that makes these flexible mortgages so appealing is the fact that there are usually no part repayment or early redemption charges. Traditional mortgages can come with a ‘sting in the tail’ in that if you decide to pay off your mortgage before the end of your current deal then you could be penalised by your lender for doing so.

Payment holidays are another aspect of flexible mortgages that many borrowers are drawn to. Being able to take an agreed period without having to make any repayments can really help to ease financial pressure in difficult times. Some lenders will allow up to 6 months mortgage holidays and this will simply be added on to the end of your agreed mortgage term. This is particularly useful for example if you’re made redundant or start a family.

Calculating interest daily rather than annually is a key aspect in the growing popularity of lifestyle mortgages. You can save significant sums during the term of your mortgage as any reduction in your overall debt is taken into account immediately and the interest is always charged on that day’s balance rather than that at the start of the year.

Additionally, a drawdown facility can enable you to withdraw lump sums from your mortgage when your life dictates it. The amount you can borrow will be pre-determined by your lender and will be added to your debt and have interest charged on it as normal.

Variable rates are normally the order of the day when it comes to these types of mortgages, although some lenders do offer a fixed rate option. So if you’re prepared to have your repayment amounts fluctuate and can accommodate this then the benefits may make a real difference to your fiscal future.

When you take a fresh look at your mortgage and think of it more as an available source of funds then you can either borrow against it, or if you have a separate savings pot you can utilise these to offset some of your mortgage debt and save on the interest.

However, this new type of mortgage doesn’t suit everyone so it’s of paramount importance to compare mortgages and their features and interest rates before making a final decision, as it’s likely to be one of the most important considerations you’ll ever have to weigh up.

Daniel Collins writes on a number of topics on behalf of a digital marketing agency and a variety of clients. As such, this article is to be considered a professional piece with business interests in mind.