What is a current account mortgage?

Current account mortgages have only been around for a couple of years. They are quite different to other types of mortgage, and they enable you to set off all your savings and debts in one single account.

It’s like having a huge overdraft - every time you pay money in, your debt is reduced. Every time you take money out, you are borrowing against the mortgage. You are free to overpay and underpay - as long as you are on schedule to repay the mortgage, and that it is completely repaid by the end of the term. You are free to either by gradually reduce the mortgage to zero (i.e. a repayment mortgage) or to take out a separate investment tool such as an ISA or pension to pay off the capital at the finish of the mortgage term (like an interest only mortgage).

Rates on current account mortgages are usually a little higher than the standard variable mortgages because you have the facility to bring all your other debts into the account too, For example you can transfer credit card debts in, whereas normally you would be paying credit card interest rates of 10-20%.

You can also offset your savings against your mortgage, paying the mortgage off faster and reducing the amount you need to pay on interest.