Current Account Mortgages

Your mortgage is likely the biggest expense in your monthly budget. In fact, most of the money you earn is likely going towards the costs of your home. Imagine having a bank account dedicated to repaying your mortgage. With a current account mortgage, you can. This new mortgage product is incredibly flexible and helps you save money on interest, fees, and even taxes.

How It Works

With a current account mortgage, you turn your mortgage into a working bank account. You get cheques, a cash card, monthly bank statements, and direct debit abilities. You will have your monthly earnings deposited into the account automatically every time you are paid.

Because you are paying back your loan on a regular basis straight from your earnings, you will pay less interest. This happens because the interest is calculated daily, which means each payment has a greater affect on the cost of the interest. Also, because your bank account is not earning interest, but rather paying it, you can avoid some of the taxes normally charged on income placed in bank accounts that earn interest. Also, this type of mortgage carries fewer hidden costs than other types. You will save substantially, and by the end of your mortgage term, you may find that you have saved thousands of pounds.

What If I Need Money?

Obviously, your money does not simply go towards your mortgage each month. When you use this type of mortgage, you can basically “borrow” against the mortgage using the cheques and cash card. This makes it easy for you to get the money you need. You can even borrow more than you earn in the month if needed.

What’s the Catch?

You may be thinking that this mortgage sounds perfect. You will be saving money while enjoying your new home. There is one main problem with current account mortgages, though. Because you can borrow against the mortgage at any time, at any amount, you may end up with more debt than you started with. If you borrow more than you earn, you will create more debt that must eventually be repaid. This makes current account mortgage problematic for many borrowers.

Borrowers who have enough discipline to keep their accounts current and not borrow too much can benefit substantially from current account mortgages. However, many borrowers find that they end up feeling falsely secure at their supposed “unlimited” income. This is why the lenders do not charge fees for this type of loan. They make back their money with the poor spending habits of many of the borrowers.