A current account mortgage is a type of flexible mortgage product that combines several financial products into one single account.
As with any other mortgage product, a current account mortgage will be secured against the borrower’s home. Current account mortgages are not usually secured against investment properties.
The main difference between a current account mortgage and a standard mortgage product is that the current account mortgage will act as both the borrower’s home loan and current account.
Current account mortgages are often referred to as a “line of credit”.
The borrower will normally be required to have their salary or wage paid directly into the current account mortgage and will be allowed to withdraw money from the line of credit as required – within a pre-determined upper limit.
In addition to combining the mortgage with a current account, it can also be combined with credit cards, personal loans, and cheque book facilities in order to streamline the borrower’s overall banking facilities into one product.
As well as helping to streamline the borrower’s banking facilities, a current account mortgage can offer flexible features that standard mortgage products do not, which can further assist the borrower with managing their personal finances.
Because a current account mortgage is a type of flexible mortgage it can offer features such as overpayments, underpayments, drawdown of overpayments previously made, additional borrowing facilities, no (or low) redemption penalties.
In addition to flexibility, a current account mortgage can help the borrower save interest and pay off their home sooner. This is due to a combination of factors such as earnings being paid directly into the mortgage, daily interest rate calculations, and no high interest loans (e.g. credit cards) to pay off simultaneously.
A current account mortgage can, therefore, provide a borrower with many features for organising their personal finances and paying off their mortgage as soon as possible.
However, despite the benefits, it is important for the borrower to remain disciplined because excessive withdrawals will increase the overall cost and term of the mortgage and negate the benefits offered.
Because of this, careful consideration should be given before applying for a current account mortgage. Professional advice may be sought from an independent mortgage adviser.
A buy-to-let mortgage is a form of investment which can offer more security than the less predictable stock market. It comes with no guarantees, but as the nation gets more in debt and standard mortgage applications are being turned down, people are looking more at renting properties as opposed to climbing the property ladder themselves.
If you are in a fairly stable financial position, you could capitalise on this by looking at buy-to-let mortgages. Do a little research first and seek out others who have had them to hear their views. If the response is positive, take a look around your area. This will help you realise your target audience, and in turn the type of property to go for.
Are there schools, supermarkets, quiet roads? Perhaps a 3 bedroom semi-detached with a garden for a family would be a good idea. Flats located near a business park will attract young professionals. Students will flock to a house near a university. Try looking a little further afield too, you don’t have to restrict yourself to your own area. Just make sure you’re close enough to visit the property on a fairly regular basis to keep an eye on things.
Once you’ve decided on a tenant base, start making enquiries about mortgages and house prices in the area of your choice. There are specialist buy-to-let mortgage brokers who will help you select the right mortgage and advise you every step of the way. Most BTL mortgages will only cover 80% of the property value, so you’ll need a sizeable deposit. You’ll also need to find out the average rent prices in your area and make sure that they will cover the repayments plus money for repairs, taxes and any other costs that will arise.
All mortgages have pitfalls, and a BTL mortgage is no exception. You may have dry periods where the property is empty, or you may find it needs some major repairs doing; you’ll need to prepare for any contingencies and add the cost to your rent.
If you don’t feel that you could cover all these costs with a reasonable rent for your area, then don’t invest just yet. Keep an eye on house prices and consider the possibility for the future instead.
In this day and age of low housing affordability, it is more difficult than ever for first-time-buyers to secure their first home. A shortage of housing stock has lead to a situation in which demand for housing far outweighs supply and this has, in turn, driven prices up and affordability down.
Because of this, many first-time-buyers no longer qualify for standard mortgage products even if they are in full-time, steady employment. Lenders have therefore been forced to invent specialised mortgages that are designed to help people take their first step onto the property ladder.
First-time-buyer mortgages are not a product of their own, but rather comprise a small set of products that are aimed at the first home buyer market. They include shared ownership, guarantor, no-deposit, key worker, and standard mortgage products that are only available to people who do not yet have their own home.
Shared ownership mortgages are fast becoming the most popular vehicle for first-time-buyer to buy their first property with. Shared ownership products allow people to purchase part of a property and rent out the other part, which is owned by the seller – usually a property developer. Over time, the buyer will purchase the remainder of the property from the developer one portion at a time.
A no-deposit mortgage is another product available to some first-time-buyers that is usually targeted towards individuals who have a steady income but who do not have enough savings to pay for a deposit. This type of mortgage products is normally issued with 100% loan-to-value ratios.
Exactly which first-time-buyer mortgages are suitable for you will depend on the circumstances under which you are buying the property as well as your personal financial situation.
A careful assessment of your personal circumstances may be required by an independent mortgage adviser in order to ensure that you select the right product for your situation.
It should also be noted that the property market is always changing and with affordability continuing to decline lenders are constantly assessing the needs of first-time-buyers.
Because the first-time-buyer market is so important to lenders, they are constantly working hard to ensure they bring new and innovative mortgages to the market which can help them get a foot on the property ladder.