This
is a relatively new type of mortgage product which goes further
than the usual flexible mortgage.
Your
mortgage account effectively becomes your bank account. You
get a chequebook, direct debit facility, credit & cash card
and regular statements etc. Your earnings are paid straight
into this "mortgage/bank account".
This
means that effectively you pay less interest on your mortgage
- because your earnings are being used to "pay back"
the loan.
Because
the interest is calculated daily any changes in your balance,
no matter how short the period, will change your interest payments.
You
also avoid paying the tax, which you would have been
liable for if you were putting your earnings into an interest
/bank account because, technically, you are not earning interest.
You
are unlikely to be charged for arranging the mortgage, or for
any redemption penalties
or compulsory insurance.
There
is a definite financial advantage to this idea, in theory
saving you thousands over the mortgage
term.
The
general criticism of Combined Mortgage and current accounts
is that they don't give you a natural "speedlimit"
to your spending (i.e. you never seem to run out of money).
Most
of us aren't great money managers. And the problem is
if you mess up with this type of account you really mess up
big time.
It's
perhaps too easy to borrow too much from the account - for a
holiday etc. - and before you know it your debt could have doubled.
Are
you disciplined enough to be able to look carefully
at what's happening with your account and to keep up regular
repayments?
You could easily be lulled into a false sense of security and
overspend bit by bit till your debt is so big you've had
it.
If
you're interested in this type of mortgage, there are now various
ones on offer. The best way to find one is to get a mortgage
adviser to help you. We can put you in contact with a qualified
mortgage
adviser here
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