A new deal from NatWest acts lets you turn your home into a sort of cash machine – providing a pot of additional borrowing that you can tap into to cover big expenses like weddings or even a new kitchen.
The HomeFlex works on an interest-only basis, so your monthly repayments only cover the interest charges on your home loan rather than help pay it off.
It does allow unlimited overpayments without any extra charges, so you can chip away at your debt, but it also means at the end of the mortgage term you will have to find the balance or get a new mortgage.
But the real selling point of the deal is what NatWest calls a ‘flexi-pot’ – a separate stash of cash that you can borrow from anytime you like.
I need some extra cash
The size of the pot available to you is worked out based on how big your mortgage is compared to your house’s value.
You can then tap into that cash whenever you like – so long as your circumstances haven’t changed – and you’ll be charged interest on it at the same rate as your mortgage.
NatWest reckons it might be popular if you want to borrow in order to help a loved one with a deposit, cover some refurbishment to your property like a new kitchen or even to go towards paying for a wedding.
Any withdrawal from this pot has to be a minimum of £10,000, so it’s not something that can help with everyday costs or the odd surprise bill.
But it’s a nice option should you have a bigger spend in mind, and don’t fancy having to go through the rigmarole of remortgaging or looking for a personal loan.
Who can get a HomeFlex mortgage?
It’s worth bearing in mind that the HomeFlex isn’t going to be an option for lots of us.
In order to qualify for the deal, you’ll need to have a sole income of at least £75,000 a year, while you can’t need to access that pot of additional borrowing immediately.
As with all interest-only mortgages now, you’ll need to have an explicit plan for how to repay the actual mortgage too – things have changed since the pre-crash days where you could get an interest-only deal without having to worry about how you’d find the money to pay off the loan once it matured.
If your plan for repaying is simply selling off the property, then you won’t be able to borrow more than 50% of the property’s value at the outset. If you have some other plan – such as other investments – then you may be able to borrow up to 75%.
Flexibility with my mortgage
While the HomeFlex might not be great for everyone, it’s a useful reminder that some homeloans can be pretty flexible.
Many mortgages allow you to overpay by up to 10% of the outstanding balance each year without charging you.
This isn’t just a good idea in that it will help you pay it off quicker, saving you money on interest charges in the process, but it may also help should you need to take a repayment holiday.
This is when a lender allows you to essentially skip a couple of months of repayments, for example if you lose your job or would prefer to devote the money you’d normally use to cover those bills towards something else.
Depending on your mortgage, if you’ve made overpayments in the past you may be able to underpay for a short period or even ‘borrow back’ some of that money.
Mum, I need your savings account details
If you have a decent pot of savings then an offset mortgage might be a good option too.
This is where your savings balance is offset against your mortgage balance, and you only have to pay interest on the difference.
So let’s say you have a £150,000 mortgage at 3% and £10,000 in savings.
By going for an offset deal, you’ll only pay interest on £140,000 of your mortgage, meaning your repayments drop from £711 to £664. You can then tap into those savings – or add to them – whenever you like.
Some lenders now offer family offset deals, so your parents could link their savings pot up with your mortgage, potentially helping you save even more.
Banks including Barclays and First Direct, as well as building societies such as Coventry, Yorkshire and Chelsea, all offer offset bpoducts.