Flexible Mortgage Options
When securing a mortgage, a borrower borrows money from a bank or lending institution under a set of terms and conditions. The borrower is required to meet those terms in conditions which are typically laid out over 15- or 30-year periods. However, because economic conditions can change, some borrowers look to find flexible mortgage options which give them more control on how they will repay the bank or lending institution.
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No Pre-Payment Penalty
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The bank or lending institution makes money by the amount of interest they are charging you on your loan. The longer you have the loan, the more interest payments that bank will receive. Because of this, some lending institutions have a pre-payment penalty attached to the loan. This means that if the borrower pre-pays the principal of the loan, they must still pay the entire amount of interest associated with the loan. Look to secure a loan with a no pre-payment penalty so that you have the option of saving money on interest payments.
Skip a Payment
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Some banks or lending institutions allow borrowers to skip a mortgage loan payment. This allows the borrower to get through a lean financial time by not having to make their mortgage payment for a month. There are usually caveats associated with this privilege, such as a borrower cannot already be behind, and the skipping can only occur once every twelve months. Also, the borrower should be aware that any interest owed to the bank will be placed on the back of the loan. So while it gives the borrower a flexible payment option at the time, the money will still be owed at the end of the loan, or when the home is sold prior to the end of the loan.
Mortgage Add-On
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A mortgage add-on, sometimes called a home equity line of credit, allows the borrower to withdraw money against the equity in their home for repairs, life costs or other bills. Typically a mortgage add-on has a lower interest rate than a credit card and offers some tax advantages to the borrower. By securing a mortgage add-on option when you first obtain your mortgage you can then withdraw money on the house without having to file a costly application to refinance the property at a later date.
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References
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