Products

Our Flexible Mortgage

We recognise that sometimes you have spare cash which could be used to reduce the amount of your mortgage. This is where a flexible commercial mortgage could help you.

How does it work?

Norwich and Peterborough's Flexible Commercial mortgage is made up of two parts. The "flexible part" works like an overdraft. The "other part" works like a straightforward capital repayment mortgage.

You can borrow up to 30% of the total loan on the "flexible part" (up to a maximum of £300,000 subject to status and security). You can reduce the balance of the "flexible part" whenever you like and, as a result, pay less in interest. As the rate of interest charged for borrowing will usually be higher than the rate you receive on your business savings, the flexible mortgage should help your money work better for you. You could choose to keep all or part of the flexible facility as a reserve and redraw it down when you want.

Each monthly repayment of the non-flexible part is made up of both capital and interest. During the early years, a large part of the monthly repayment will be made up of interest; in later years more of the capital will be repaid.

Ways to pay your mortgage

You can choose from either a variable rate or a fixed rate for your flexible mortgage, however, please note that the "flexible part" of the mortgage must be on a variable rate.:

Variable rate mortgage

The interest rate can be linked to three month LIBOR or Bank Base Rate.

LIBOR (London Inter Bank Offer Rate) is the rate of interest at which banks offer to lend money to one another in the City of London.

Although interest rates are likely to change from time to time thoroughout the year, your monthly payment will only change once a year, helping you to budget more effectively.

Fixed rate mortgage

With a fixed rate mortgage you know exactly what the interest rate will be, for a fixed period, at the start of the mortgage term. At the end of the fixed rate period, the mortgage will transfer to 3 month LIBOR or Bank Base Rate plus an interest margin (which may be either higher or lower than the fixed rate that previously applied). You should, therefore, budget for the possibility of higher repayments at the end of the fixed rate period.

Who can take out a Flexible Commercial mortgage?

The Flexible Commercial mortgage is available to all commercial borrowers, as long as they meet our standard commercial mortgage criteria (details available on request).

How is interest calculated and charged?

Interest is calculated daily and charged monthly on both parts.

How much of the flexible part must I repay in each year?

The limit on the flexible part is reduced each year of the term by the amount by which it would have reduced had it been part of a repayment mortgage. When you take out the mortgage you will be given a personal repayment plan. This will show, year by year, the amount by which you must reduce the flexible part.

How long do I have to repay back the mortgage?

The maximum mortgage term is 25 years. Both parts of the loan will have the same term. The flexible part can be repaid at any time without causing the facility to be cancelled or incurring any additional interest charges.