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Current Account Mortgages
A current account mortgage is a type of "all in one mortgage". It combines your mortgage repayments with your current account. The current account is just like any normal current account – occupational income is paid in monthly and you get the usual debit card and cheque book. Your income is used to make the monthly mortgage repayments and interest is usually recalculated daily. This means the borrower makes a saving on interest charges every time they pay off some of the mortgage loan capital. This is useful if you are likely to receive bonuses in addition to your regular income.
How do current account mortgages work?
Having a current account mortgage is like having a huge overdraft on a regular bank account. That overdraft is not just a regular overdraft though, as it also includes the mortgage. This makes the current account mortgage very flexible as it allows the borrower to increase or decrease mortgage repayments, and borrow back using the current account for all other expenditures.
Each month income is paid into the current account. Any regular expenditure is debited from the account using card, cheques or cash withdrawal. The money left over is used to repay the mortgage monthly. This allows the borrower to potentially save a lot of money on interest charges by repaying the mortgage early. It also allows for flexible repayments in the same way as a flexible mortgage.
Problems with the current account mortgage
The main problem that borrowers are likely to experience with a current account mortgage is coping with the possibility of overspending. With such a large amount of money available to the borrower it may be tempting to spend it on other things rather than repaying the mortgage. This could result in a longer mortgage term than is desirable meaning interest charges would also be larger over the period of the mortgage term.
Click on
The One Account Mortgage to see how current account mortgage
works for you.
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