Current Account Mortgage Information by Michael Sterios

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. This type of home loan product cannot usually be secured against investment properties.

The main difference between a current account mortgage and a standard mortgage product is that this type of home loan will act as both the borrower’s home loan and current account. That is why these 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. It can be tempting to withdraw money previously paid off the balance of the mortgage to fund personal expenses such as furniture and holidays. Holders of current account mortgages need to be vigilant and curb their unnecessary spending if they are to pay off the entire balance of their home loan within an acceptable time frame.

Because of this, careful consideration should be given before applying for a current account mortgage. Professional advice should be sought from an independent mortgage adviser who can provide advice on the entire mortgage market in the UK. An independent adviser will be able to assess whether a current account mortgage is right for you and, if so, which products and lenders to consider applying to.

In order to receive the best advice it will be necessary to contact an independent adviser rather than a tied adviser. A tied adviser will only be able to provide advice and information on a select range of products from a limited number of lenders. An independent adviser will be able to provide unbiased advice on the whole of the UK mortgage market.