What Is A Current Account Mortgage?
Author: Sandra Carver

Current account mortgages are a type of flexible mortgage and
they have been around for well over 10 years in the UK. Current
account mortgages work by combining your mortgage and current
account into a single account. For example, if there is £3,000
in the current account and the mortgage is £100,000 the balance
in the account will show £93,000 overdrawn. The balance is
calculated daily and the homeowner only pays interest on the
balance. Any saved income you have in your current account at
the end of the month is automatically deducted from the mortgage
debt you owe. If cash is allowed to build up in the current
account mortgage, the savings on interest payments can be
significant. For maximum gain, bills can be synchronized to be
paid at the end of each month. Every time money goes into your
current account, you reduce the amount of the overdraft and
every time you take money out, the overdraft increases.

Current account mortgages allow the interest charges on all
your borrowings, including credit card debt, to be at the
cheaper interest rate of the mortgage, instead of the average
credit card or loan rate. So you can save money in the long run,
you still need to pay off the non-mortgage debt as quickly as
possible. If you simply add these debts to your mortgage and pay
them off over 25 years, instead of 3 or 4 years, overall you'll
pay more interest.

Different features with Current Account Mortgages

There are a wide range of current account mortgages in the
marketplace. Different current account mortgages come with
different features such as overpayments, payment holidays,
underpayments and credit card and loan facilities. Some current
account mortgages include a restriction on withdrawals,
overpayments and underpayments and some include fees and
charges, such as early redemption penalties.

Interest Rates

In general, you will find that you pay for the flexibility of a
current account mortgage through a higher rate of interest than
more traditional mortgages and because the lenders are also
taking a risk with current account mortgages. They will make
less money on the mortgage if you pay it back early, or they
might not get the money back if you are unable to discipline
yourself and make your repayments. A current account mortgage
works both ways and if you get it right, in particular the
management of it, then it will benefit both the lender and the
borrower.

The Downside of Current Account Mortgages

The downside with current account mortgages is financial
discipline. You need financial discipline and planning to
properly maintain current account mortgages and to be able to
resist the temptation to use the large sums of capital
available.

The amount of debt visible on the current account balance, in
the tens or hundreds of thousands, can also be intimidating to
borrowers when viewed on a daily basis!

Benefits of Using an Independent Mortgage Broker

Due to the range of current account mortgages, independent
mortgage brokers can advise and give you information, as well as
being able to judge suitability for having a current account
mortgage.

Conclusion

Current account mortgages combine your current account and
mortgage into one account. They offer flexibility with options
such as overpayment which can allow you to pay off your mortgage
quicker. Although current account mortgages are fairly new in
the marketplace, their popularity is increasing as more home
owners recognize the benefits they offer.


About The Author: For more information, visit
http://www.offsetmortgagecentre.co.uk/current-account-mortgages.html