Current account mortgages
A current account mortgage (CAM) combines the flexible mortgage
with a current account. In other words you combine what you owe
with what you own. In the same way as a bank account your income is
paid into your current account and partially used to repay your
mortgage.
Your lender will set a maximum borrowing limit, much like an
overdraft, and provide you with a chequebook. The lender calculates
the mortgage interest rate on a daily basis meaning as long as you
keep up payments your interest rate should continue to fall. After
all income and expenditure is calculated, at the end of the month,
what is left will contribute towards paying off your mortgage.
As with most flexible mortgages most lenders will allow you to
make over payments, underpayments and take payment holidays. For
this service, and for a slightly greater than average risk to the
lender, most lenders will charge a slightly higher interest
rate.
Current account mortgages give you the ability to shorten the
life of your mortgage term and therefore save considerable money by
paying less interest. If you earn regular bonuses and/or commission
pay you will be able to overpay when possible if you have the
discipline to do so.
If you underpay or take a payment holiday this could increase
the monthly payments or term of the mortgage.
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