Current
Account Mortgages - Mortgage Information
What
is a Current Account Mortgage?
Current
account mortgages are quite different and work by turning your mortgage
into a large overdraft. They allow you to set off all the savings
you have against all the debts you that owe. You combine all your
debts with all of your income in a single current account. So every
time your salary is paid in, you reduce the amount of the 'overdraft'.
Every time you take money out, the overdraft increases. This means
you can overpay and underpay without being penalised for it. You
have to repay the loan by a set time, either by gradually reducing
your borrowings to zero (just like a repayment
mortgage) or by using another investment such as an ISA to repay
your capital at the appropriate time (similar to an interest-only
mortgage).
The
good thing about current account mortgages is that the interest
charges on all your borrowings are at a cheaper, variable rate for
mortgages instead of the more common credit card rates. To compensate
for this, rates on current account mortgages, and also flexible
mortgages, tend to be slightly higher than standard mortgages.
Therefore you may need to do some sums to see if you would be better
off taking this route.
You
can also use your savings to offset your mortgage costs, thus paying
it off more quickly. There are tax advantages too, particularly
if you're a 40% taxpayer. You don't pay any tax on the reduced interest
you pay, because of your savings. With current account mortgages,
you have to have a certain amount of discipline. You might find
it too tempting to just blow your overpayments on that car you've
always wanted, only to find you've just been made redundant. Overpay
when you can, but only take advantage of the facility to underpay
when you really have to.
List
of Major Mortgage Lenders
OCIS
provide general financial information, we urge you to consult an
Independent
Financial Adviser ( IFA )
before making any important decisions about your finances. |
