Guide To Current Account Mortgages

What is a current account mortgage?

A Current Account Mortgage, or CAM, is a mortgage with a difference. It consolidates your mortgage borrowing, monthly income and expenditures into a single current account.

Who can use a current account mortgage?

CAMs can be used by many of those eligible for standard repayment mortgages. Discipline and clear financial planning is required to make the most of a current account mortgage, and some CAM providers also have personal income requirements for borrowers.

What the benefits of a current account mortgage?

The combination of your income, mortgage borrowing and expenditures into a single current account can lead to reductions in your monthly interest payments. This is due to the way a CAM operates, with interest calculated on the balance of the account on a daily basis. As your income is paid in the amount of borrowing is reduced, leading to lower interest payments.

Any excess income left at the end of the month will also lead to the same reductions. If cash is allowed to build up in the current account the savings on interest payments can become more dramatic. For maximum gain bills can be synchronised to be paid at the end of each month. A CAM’s unified setup can also make it easier to manage than other similar alternatives, such as an offset mortgage.

What are the disadvantages of current account mortgages?

The discipline and financial planning required to maintain a CAM properly are not for everyone. The benefits of a CAM can only be achieved through careful accumulation of funds in the current account, with the borrower able to resist the temptation to use the large sums of capital available.

The amount of debt visible on the current account balance, in the tens or hundreds of thousands, can also be intimidating to many when viewed on a daily basis. Due to its specialist setup, a CAM can also be subject to higher interest rates than other more restrictive forms of repayment mortgage.

How much does a current account mortgage cost?

Apart from the potential for a higher interest rate, a CAM will be roughly equivalent in cost to any other repayment mortgages. The charges and fees in the contract of a mortgage will vary from provider to provider.

What is the best current account mortgage?

Choosing the best current account mortgage is something only you can do. There are a number of factors that distinguish between different products.

Those considering current account mortgages should look at the options the lender provides to them. CAMs can come with features such as credit card and loan facilities, payment holidays, borrowing back and saving facilities. There can also be terms included that restrict withdrawals, overpayments and underpayments.

Be sure to examine any contract or policy in detail, and ask questions on any areas you feel are unclear.

Certain fees and charges can also be included in CAMs, such as early redemption penalties. It is important to check what these are, and how they will affect any future plans. For those who plan to remortgage, products with fees and charges can make this a more expensive process than it needs to be.

How do you purchase a current account mortgage?

A CAM is available in a similar process to other repayment mortgages. Other preparations that are specific to a current account mortgage will also be required, such as confirmation of personal income for those that require it.

There will also be a process of setting up the combined mortgage and current account. This will involve, depending on the product itself, moving income, expenditure, savings and other regular payments. The details of what is required will be included in the CAM policy.

Who provides current account mortgages?

Due to their niche appeal, CAMs are not as widely available as other mortgage products. However, there are still choices from a number of different banks, building societies and specialist companies. Brokers, agents and other intermediaries may also offer them as part of affiliate deals with providers.

Customers should remain aware that a current account mortgage is not for everyone, and many of the people they speak to in these organisations may be tied to certain products or paid on a commission basis.

Independent financial advisers (IFAs) can also advise on current account mortgages, as well as being able to judge suitability when given enough information.

IFAs are legally required to provide unbiased and independent advice, and have access to all the products available on the market.