“I just wanted to write to you and thank you for your professional and efficient mortgage services which enabled me to purchase the above property. I was very impressed by the amount of work you put into making this an easy transaction for me, without this help, I would have found it extremely stressful and frustrating. You took all the hassle out of this process and for that, I thank you.”
Current Account Mortgage
A Current Account Mortgage (CAM) combines a flexible mortgage product with a standard banking current account. In other words, you can combine what you owe with what you own.
In a CAM, income is paid into a current account, of which part is used to repay the mortgage. The lender sets a maximum borrowing limit which operates like an overdraft in a standard current account, Mortgage interest is then calculated on a daily basis, meaning as long as payments in the account are kept up the interest will continue to fall. After all income and expenditure is calculated, what is left over at the end of the month will contribute towards paying the mortgage. As with most flexible mortgages, most lenders will allow you to make overpayments, underpayments and take payment holidays.
If regular overpayments are made CAM customers have the ability to shorten the life of their mortgage term and therefore save considerable money by paying less interest. This makes CAM mortgages particularly suitable for users who earn regular bonuses or commission beyond their normal monthly salary. However as a CAM carries greater than average risk to mortgage lenders, most mortgage providers charge slightly higher interest rates to use them.
An Offset Mortgage offsets the amount in held savings and current accounts against the outstanding mortgage interest, offering users an opportunity to pay off their mortgage more quickly and hence more cheaply.
While this means no interest will be earned on savings or within a current account, the interest sums saved work on reducing mortgage payments, helping it to get paid sooner. As BoE base rates are currently extremely low, some savers may find it more advantageous to use their savings to pay off their mortgage.
Debts such as credit cards and personal loads can also be consolidated into an Offset Mortgage, meaning these borrowings can be repaid at a mortgage rate that is probably lower than the rate normally applied to these debts. It is however important to remember that by consolidating debts into your offset mortgage, you are changing your short-term debt into long-term debt - so users should ensure they are paid off sooner rather than later, otherwise it will cost more in the long run.
Those who have large sums in their savings or current accounts will find offset mortgages a useful option, as well as those who have variable incomes, such as the self employed.