What Is A Current Account Mortgage

What is​ a​ Current Account Mortgage?
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.
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.

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