The time had come for me to remortgage my house, and I had heard that a flexible tracker mortgage could be just what I needed because of my fluctuating income. The last time I had bought a mortgage, I was a plumber working for a plumbing company, and there wasn’t any problems with making my monthly remortgage payments. All that changed when I decided to branch out and become a self-employed plumber. I love being my own boss, but the downside is my intermittent income. Some months I had lots of money coming, and other months I was living on the bread line and finding it a struggle to make my monthly remortgage payments.
I was discussing the situation with a friend of mine, who was a free-lance business consultant. He said he had been advised by an independent mortgage broker to opt for a flexible tracker mortgage because it offered him several benefits. I told him I hadn’t heard of that mortgage, so he explained it to me. He said that basically a flexible tracker was two mortgages rolled into one: flexible because it allowed overpayments when he was flush with money, underpayments when he was having a tight month or two, and even payment holidays if there were other big bills to pay. Tracker because it tracked the Bank of England (BOE) Base Rate rather then a lender’s standard variable rate (SVR) of interest. He explained the SVR was often set higher than the BOE base rate, and just because the BOE dropped their Base Rate, it didn’t mean a lender would drop their SVR for their borrowers. He said most flexible tracker mortgages only tracked the BOE Base Rate for a limited time; say one to ten years, before it was changed over to the lender’s SVR. He then added that because the mortgage tracked the BOE Base Rate, the interest payments could go up as well as down, same as SVR interest.
For the last few months he said he had been making overpayments on his mortgage. Like most flexible tracker mortgages he could only make underpayments or have a payment holiday when he had made a few overpayments, so he was preparing for the time when money was a bit tight. The other reason he was making overpayments was because he was aiming to pay his mortgage off early and save himself thousands of pounds in interest repayments. With that in mind he had opted for a mortgage that didn’t have an Early Repayment Charge (ERC), otherwise he could find himself having to pay about 3% of the outstanding amount owed on his mortgage – and that could run into thousands of pounds.
He then went on to say, if it hadn’t have been for his mortgage broker he would have gone for the wrong flexible tracker mortgage. After his initial consultation with his broker, he went away to think about things, and ended up looking for a mortgage deal by himself. He came across a flexible tracker mortgage with low interest rates and was nearly going to buy it because he thought it was a good deal. However, he decided to see his mortgage broker again and tell him about the mortgage he had found. When the mortgage broker looked at it, he informed my friend he would pay a lot of money in high fees and explained a mortgage needs to be looked at as a whole, rather than judging a mortgage purely on its interest rates. The broker then found him a flexible tracker mortgage that suited his needs.
With all the information given to me by my friend, I knew what my next step was going to be: I was going to book an appointment with an independent mortgage broker to discuss a flexible tracker mortgage.
