Mortgage is a legal agreement between borrowers and lenders. With mortgage, a borrower can borrow money from any loan lending organization and give them the right to repossess his property. This property acts as guarantee incase he fails to pay-off the loan amount. Some examples of different mortgage features are cash-back mortgages; flexible mortgages; offset mortgages; and current account mortgages. Let us examine the basic features of each of these mortgages.

Cash-back mortgage: This may be offered with an interest-rate deal. The lender pays you a substantial sum shortly after you take up the loan. If you move to another lender in the early years you’ll have to repay some or all of the cash-back received. It is right for you if you need a large cash sum or you expect the sum to more than compensate for any higher interest rate you may have to pay during the penalty period. If you can manage without the cash-back now and can get a better overall deal elsewhere then this option may not be right for you.


Flexible mortgage: A flexible mortgage gives you some scope to change your monthly payments to suit your ability to pay. It’s also useful if you want to pay off your loan more quickly. Several flexible features are becoming common and they aren’t limited to mortgages with ‘flexible’ in their name. Here are some flexible features:

You can pay more than your normal monthly mortgage payment or pay off a lump sum, or both. Or you pay less than the normal monthly payment for a limited period, say six or twelve months. You may even be able to stop making payments altogether. It is known as a payment holiday. This could be useful if, say, you lose your job or take time off to care for a child. Also, you can borrow extra without further approval from your lender, provided the total loan does not go above an overall limit. Alternatively you may be able to ‘borrow back’ against earlier overpayments.

A flexible mortgage is right for you if you are likely to use these features, for example if you are self-employed and have a variable income. It may not be suitable if you are unlikely to use these features. A less flexible mortgage may be cheaper or more suitable for you.


Offset mortgage: With an offset mortgage, your main current account or savings account (or both) are linked to your mortgage and are usually, but not always, held with the mortgage lender. Each month, the amount you owe on your mortgage is reduced by the amount in these accounts before working out the interest due on the loan. So as your current account and savings balances go up, you pay less on your mortgage. As they go down, you pay more.

Current account mortgage: A current account mortgage is similar to an offset mortgage in that it offsets the balance of your savings against your mortgage. However, in this case, rather than your mortgage and current account being separate pots of money, they are usually combined into one account. This means that the account acts like one big overdraft.

The offset or current account mortgage is suitable to you if you are a higher rate taxpayer, have substantial savings to offset and like the idea of built-in flexibility to make overpayments and underpayments. These may not be suitable if after paying your deposit you do not have much left in savings and if other mortgages have a lower interest rate or other features that are more important to you.