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What is a Current Account Mortgage? |
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Different current account mortgages come with different features such as over and underpayments. Current account mortgages require financial discipline for them to work to your advantage and ultimately pay your mortgage off early. |
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| Author: Sandra Carver |
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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 recognise the benefits they offer.
About Author
Sandra Carver wrote the article ‘What is a Current Account Mortgage?’ and recommends you visit The Offset Mortgage Centre for more information on flexible and http://www.offsetmortgagecentre.co.uk/current-account-mortgages.html
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