Current Account Mortgages Ė Practical Application

Current Account Mortgages

Conceptually, the idea of a current account mortgage (CAM) is very simple. A CAM combines current account...

Practical Application

Get a Free Quote Working out the Practical Application of a Current Account Mortgage

One of the best ways to establish whether or not a current account mortgage would suit your individual needs is to see how the figures would work, in practice.

For example, if you were to take a mortgage of £70,000 the total paid back would be £134,664 or £489 a month if taken out at as a standard interest and repayment mortgage over 25 years at an APR of 6.2 percent.

Now letís consider a current account mortgage where the residue left over in your current account works towards paying off the mortgage early. With a current account mortgage, it would be possible for an additional £100 a month to make a substantial difference.

By making these reasonably small overpayments on a monthly basis, the mortgage (or overdraft) would be reduced to zero within 8 years. Not only would this mean that the property is owned outright in just 17 years as opposed to the original 25 years, but it would also mean that interest is not accruing for the remaining 8 years.

Overall reduction in payments made to the lender would, over the term of the loan, mean that £23,618 would be saved! This shows just how much can be made with even a small contribution.

Better still, if a lump sum payment of £5,000 was put into the current account at the initial point when the mortgage is taken out, this would reduce the total term of the mortgage by a further 2 years. By doing this, the savings gained over the life of the loan would be a whopping £7,859.

Therefore, with an initial input of £5,000 and an additional payment of £100 a month, a mortgage that would have cost £134,664 and taken 25 years to clear would actually only cost £103,187 and would be cleared within 15 years.

Obtaining a Current Account Mortgage
Current account mortgages have only been available for approximately ten years but are now offered by some of the leading high street banks including: Royal Bank of Scotland; Halifax; First Direct; and Norwich & Peterborough Building Society.

Summary
Bullet Point The benefits of a current account mortgage can really be seen with a simple illustration;
Bullet Point even relatively small overpayments, either by a lump sum or regular monthly input can make a dramatic difference to the overall effect of the mortgage;
Bullet Point many high street banks now offer current account mortgages, so try contacting your current provider to see what products they offer.

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