Current Account Mortgages

Guide to Current Account Mortgages

A current account mortgage is a flexible mortgage that combines your current account and mortgage into one.

Every penny you have in your current account is off-set against your mortgage, thus reducing your mortgage balance and saving on interest costs. For instance, on a particular day a borrower has a mortgage balance of £60,000 and has £3,000 held in his current account. The customer is then charged mortgage interest on £57,000 - the mortgage balance minus the positive balance held in the current account.

This is a very effective way of reducing your mortgage interest charges as it makes all of your money work for you.

For a borrower wanting a one-stop-shop for all their finances this is an attractive option.

However, the main problem with this mortgage is that it can be very difficult to work out whether or not you are better off applying for a an attractive discounted mortgage or taking a CAM - some say that you need the IQ of a rocket scientist to work that out.

Stepped rate mortgages

Stepped rate mortgages come in various forms. They can be discounted for a number of years, with the discount rate reducing during the scheme period, or even short-term fixed rates followed by a discounted period.

Some schemes even offer a combination with a cashback to help with moving costs. Basically a stepped rate mortgage means that you start off with a great deal on your mortgage and your repayments gradually increase.

But beware, as with the discounted rate mortgage, most lenders charge a penalty fee if you fully repay your mortgage within a certain time.

Fixed Rate Mortgages | Standard Variable Mortgages | Mortgage Advice