Mortgage Incentives

There are often various incentives offered by lenders that should be taken into account when choosing a mortgage.


Flexible Mortgages

A Flexible mortgage as the name implies allows a borrower is to make extra repayments when extra money is available, and to reduce or even miss payments when necessary. Borrowers will normally have to build up a reserve through overpayments before being allowed to underpay or miss payments. One major benefit of flexible mortgages is that most lenders will calculate the interest on a Daily Basis, so you are only paying interest on the amount actually owed to the lender. If this were not the case and interest was calculated on an annual basis, then the mortgage would not be very flexible because borrowers making over-payments would not get the benefit straight away because it could be a year before the balance outstanding was reduced by the over-payment. Making extra payments into your mortgage account on a regular basis, even relatively small amounts, could reduce your mortgage term by several years and save you a lot of money over time.

The majority of flexible mortgages do not have any Early Redemption Charge and additionally the interest rates are often lower than the usual Standard Variable Rates charged on the more traditional mortgage products.

Current Account Mortgage

This takes the concept of a flexible mortgage one stage further by linking the mortgage to a current account. These mortgages take the benefits of the flexible mortgage and use the funds held in the current account to offset the interest payable on the mortgage account. For example if you had a mortgage balance of £40,000 and £3,000 in your current account you will only be charged interest on £37,000 the difference between the two.

Some of the lenders offer the option of linking savings accounts, credit cards and personal loans to your mortgage account.

Cash-back

Some lenders will offer a lump sum of cash once the mortgage has completed. The amount can range from a flat rate of cash-back or a percentage of the loan. Sometimes quite substantial cash-backs can be offered 5 or even 6% which would be useful for a borrower who was struggling to raise a deposit.

As you would expect lenders will apply an Early Redemption Charge with a cash-back mortgage if it is redeemed within a certain period, usually two - five years depending on the lender and the amount of cash-back received.

Free Legal Fees

Commonly offered on re-mortgages, the mortgage applicant will normally need to use a firm of lawyers recommended by the lender.


Free Valuation or Refund of Valuation

Again, more commonly offered on re-mortgages (but a few lenders offer a free valuation on a house purchase). A FREE VALUATION requires no up-front payment from the mortgage applicant. Some advertised schemes offer a free valuation when its really a REFUND OF VALUATION, so if the application does not proceed to completion then no refund will be given.

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