A current account mortgage is a type of flexible mortgage product that combines several financial products into one single account.
As with any other mortgage product, a current account mortgage will be secured against the borrower’s home. Current account mortgages are not usually secured against investment properties.
The main difference between a current account mortgage and a standard mortgage product is that the current account mortgage will act as both the borrower’s home loan and current account.
Current account mortgages are often referred to as a “line of credit”.
The borrower will normally be required to have their salary or wage paid directly into the current account mortgage and will be allowed to withdraw money from the line of credit as required – within a pre-determined upper limit.
In addition to combining the mortgage with a current account, it can also be combined with credit cards, personal loans, and cheque book facilities in order to streamline the borrower’s overall banking facilities into one product.
As well as helping to streamline the borrower’s banking facilities, a current account mortgage can offer flexible features that standard mortgage products do not, which can further assist the borrower with managing their personal finances.
Because a current account mortgage is a type of flexible mortgage it can offer features such as overpayments, underpayments, drawdown of overpayments previously made, additional borrowing facilities, no (or low) redemption penalties.
In addition to flexibility, a current account mortgage can help the borrower save interest and pay off their home sooner. This is due to a combination of factors such as earnings being paid directly into the mortgage, daily interest rate calculations, and no high interest loans (e.g. credit cards) to pay off simultaneously.
A current account mortgage can, therefore, provide a borrower with many features for organising their personal finances and paying off their mortgage as soon as possible.
However, despite the benefits, it is important for the borrower to remain disciplined because excessive withdrawals will increase the overall cost and term of the mortgage and negate the benefits offered.
Because of this, careful consideration should be given before applying for a current account mortgage. Professional advice may be sought from an independent mortgage adviser.
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