Current Account Offset Mortgages
A current account mortgage can cover all the interest rate options, tracker, variable, discounted, fixed etc, and have been available for many years.
A current account mortgage (CAM) is basically a combination of a current account and a flexible mortgage. Current Account Mortgages are designed to speed up the repayment of your mortgage thereby reducing the term and interest you would otherwise pay, by making best use of all your income and savings. There are now a number of lenders offering these types of mortgages, and they are becoming increasingly popular with all types of purchasers, from first time buyers to the self employed.
Current Account Morgages
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They are portable and flexible allowing overpayments, underpayments, payment holidays. Interest is calculated daily. Account benefits can be a cheque book, Switch and Visa. Any borrowing can be charged at the same interest rate as the mortgage. All existing loans, credit cards may be consolidated and can be charged at the same rate of interest as the mortgage.
( Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage )
A current account mortgage (CAM) can be ideal if you would like the option to pay additional lump sums or make regular overpayments, thus reducing the cost of your mortgage at a stroke and also shortening the term. You may be self-employed with income fluctuations,or you may earn commission or bonuses that make this possible. Their unique selling point is that you can combine both monthly income and savings to reduce the amount of mortgage interest that you pay.
The majority of current account mortgages work on the following principle. Your mortgage account and current account are combined whilst retaining all the flexibility and features you would expect from your normal bank current account. The difference being that each month when earnings are paid into the account they reduce the balance on the outstanding mortgage. As interest in most cases is charged daily this results in a reduction in the interest that would otherwise be charged. The result being that your monthly mortgage payment contains a higher capital repayment portion which in turn speeds up the repayment of the mortgage by reducing the capital more quickly and thereby reducing the mortgage term.
Flexible Offset Current Account Mortgages .................
The current account is used in the same way with direct debits etc. being taken as normal, cashpoint withdrawals etc. Simply by paying in your earnings you reduce the mortgage interest charged.
In addition current account mortgages can be extremely tax efficient. Rather than having a conventional savings account, you can pay your savings into the current account. The lender will only charge interest on the net mortgage balance after allowing for the credit balance in the current account. You do not earn interest on the current account but instead offset mortgage interest at the mortgage interest rate applicable to your loan. As you offset interest at the same rate as the mortgage, the interest savings will often be greater than the rate of interest earned on a conventional savings account. And what’s more there is no tax to pay, so in real terms offsetting interest on your mortgage account is not only financially more efficient but it helps to reduce the term of the mortgage, as the ongoing monthly mortgage payment includes an increased capital repayment that would have been paid in interest were it not for the interest that had been offset.
Current account mortgages provide easy access to your money. You can withdraw your money as and when you like subject to remaining within your agreed limit. Detailed monthly statements and annual reviews help you keep track of everything.
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Flexible Offset Current Account Mortgages