The Benefits of Current Account Mortgages

2007-03-08 10:33:40

( Financial )



You do not want to let mortgage payments go past due because this would mean soaring interest rates at the very least and losing your home and security at the worst. To prevent this from happening, you can take advantage of current account mortgages. Current account mortgages are payment plans offered by financial institutions to pay your outstanding loans by offsetting them against your current and savings account.

For instance, you have a mortgage on the one hand and a savings account on the other. You can apply for one of the available current account mortgages plans available and begin letting your savings account work in paying your mortgage.

This is how it basically works. Instead of having two separate accounts, a savings account where you earn interest, and a mortgage where you pay interest, you can consolidate them into one single account. The financial institutions that offer you current account mortgages will draw up a plan that would require you to have a minimum amount of money in the account to take care of your mortgage payments. Thus, the more money you leave into your account, the lower your interest rate payments on the mortgage are, and the faster you will be able to pay off your principal.

You can even accelerate repayment of your mortgage loans. Most current account mortgages providers allow you to deposit more than the minimum money into your account. And the more money you have in the account, the less interest you pay on the mortgage.

You also do not lose the flexibility of having money when you need it. Current account mortgages allow you to withdraw money from the account, just like a regular savings account. You just have to be careful because if you leave less than the minimum amount in the account, your interest rates will go up instead of down. To prevent this from happening, some current account mortgages companies set a withdrawal limit.

You may be wondering about the interest you are supposed to be earning if your savings account were still separate from your mortgage payments. In current account mortgages, your savings do not earn you money. But since they offset the mortgage loan and reduce your interest rates, your savings are actually earning a higher interest than they would have been doing in a regular account. And generally, current account mortgages do not get charged income tax whereas savings accounts generally are charged income tax.


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