Know your mortgage: Current account mortgages

Similar to offset mortgages, this option lets you combine your finances (e.g. mortgage, credit cards, store cards, bank account, loans) into a single account with the mortgage lender.

Basically, whenever the account is in credit, this amount is considered a mortgage payment and reduces your mortgage debt accordingly. And as interest is usually calculated on a daily basis, the mortgage debt is reduced immediately. However, if your account goes into the red, this will effectively increase the mortgage debt.

If you’re a good saver with a current account that is always in credit, this type of mortgage could be your best chance of clearing a mortgage early, but you could also end up paying more in interest in the long term if you frequently underpay or if you take regular payment holidays.

Next - Part 16: Cashback Mortgages