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Below, you'll find
extensive information on leading bad credit mortgage
refinancing articles and products to help you on your way
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All-in-one Mortgages
By James Miller
An increasing number of
lenders offer all-in-one mortgages that combine a
flexible loan with a current account and, in some cases,
savings accounts and a credit card as well. In its
simplest form, called a �current account mortgage�
(CAM), you pay your salary direct into the mortgage
account where it immediately reduces your mortgage
balance. You then draw against the account for your normal
spending as you would with an ordinary current account.
The mortgage balance and interest on it is
calculated daily, so even money left in the account for
only a short period of time has some impact on the cost of
your mortgage. In the more sophisticated versions
(called �offset mortgages�), you have several
accounts - one each for the mortgage, your current
account, savings account and so on - running alongside
each other. Each day the net balance for all the accounts
is calculated and interest worked out on the overall
total.
On the face of it, all-in-one mortgages are very
efficient. Any positive balance in you current or savings
account reduces your mortgage balance and so saves
you interest. In effect then, you current account balance
and savings are earning the morning rate of interest. Not
only is that typically higher than the rates available on
savings, but you are not charged any tax on the interest
saved.
In effect, an offset mortgage puts you in a
position where you are devoting the bulk of your savings
to reducing your mortgage. This can save thousands
of pounds off the cost of your mortgage and could
mean you pay off the loan early. You still have the
flexibility to divert your savings instead to other uses,
in which case you give up some of the mortgage cost
savings.
Of course, you don�t need an offset mortgage to pay
off your loan early. You could have an ordinary mortgage
and a completely separate savings account. From time to
time, you could use your savings to pay off a chunk of
your mortgage. That too would save you thousands of
pounds in mortgage costs and could mean paying off
the loan early. But, unlike the all-in-one mortgage,
your savings would not earn the mortgage rate of
interest, you would have to pay tax on the savings
interest and, having paid off part of
the mortgage, it would be more difficult to change your
mind and use your savings for some other purpose after all
(because you would need to take out a new mortgage
to �get back� your savings).
The drawback of all-in-one mortgages is that the
mortgage rate of interest is often higher than deals
you could get elsewhere and, in particular, there are
often no special deals, such as a low discounted rate for
the first few years. If you have only a low balance in
your current account and little in savings, the benefits
you get from combining the accounts may be too small to
outweigh the extra cost of the mortgage. And
combining your finances in this way could be confusing,
especially in the case of a CAM where you have just a
single account for both your mortgage and current
account. You need to be the sort of person who can
efficiently keep track of their money.
If you are good with your finances, generally have a high
current account balance, have reasonably high savings and
you are a taxpayer (particularly a higher rate taxpayer),
an all-in-one mortgage could be a good choice. But
check the mortgage is reasonably priced and has all the
features you want.
Article Source:
http://www.articlemap.com
More information :
www.apply-for-mortgage.co.uk
www.mortgage-calculator-for.co.uk
www.mortgage-rate-for-uk.co.uk
James Miller is a freelance writer specialised in consumer credit,
covering topics such as how to deal with bad credit, mortgages and
insurance. He aims to help people navigate the financial industry
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