Current Account Mortgage

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Should you put all your eggs in one basket?

A current account mortgage combines your mortgage with your bank account, saving you stacks of cash on your mortgage payment. At least, that's the theory, but if you're not thrifty you might not save as much as you think and your savings won't pay interest.

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A current account mortgage removes the distinction between different accounts. Instead of a current account, a savings account and a mortgage, you have a single account from which your mortgage payments are taken.

With normal bank accounts you can expect to earn interest on your current account and savings account balances; with a current account mortgage, you don't. Instead, the money in your account is used to reduce your mortgage, which can mean a significant saving over the term of your borrowing. You could pay thousands of pounds less in interest: the Royal Bank of Scotland suggests that if you pay in £7,000 at the very beginning of the term and don't spend it then you would pay off your mortgage 9 years early and save £52,579 in interest. Saving just £100 per month would cut the mortgage term by almost 7 years, saving £36,733.

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