The Scottish flexible mortgage from the Scottish Building Society is aimed at borrowers who want to buy a new home in Scotland.
The mortgage is available for loans of up to 90 per cent of the value of the property, with Scottish Building Society giving the mortgage a 2 per cent discount for the first six months of the loan. This gives it an initial rate of 3.75 per cent.
Scottish Building Society will provide lenders with free unemployment insurance for the first five years of the loan. Borrowers who are remortgaging their properties will be able to get their basic valuation and legal fees refunded by the company if they use experts recommended by the society. If the mortgage is redeemed in the first five years then the borrower will have to pay a fee of two months interest in the first three years and one months interest in year four and five.
The flexible features include underpayments, overpayments and the facility to take payment holidays. However, unlike other flexible mortgages interest is calculated monthly instead of daily and there is no facility for lump sum withdrawal.
Only two building societies confine their lending to just Scotland: Scottish Building Society and Dunfermline Building Society. As Dunfermline does not offer any discounted flexible mortgages, this makes the Scottish Building Society offering unique. It is also the most competitive six-month discounted flexible mortgage in the UK market according to Moneyfacts on September 25, 2001. Its nearest competition comes from Standard Life Bank, which offers a flexible mortgage with a 1.76 per cent discount for the first six months, giving it a payable rate of 3.99 per cent for loans of up to 90 per cent of valuation.