workings of current account mortgages?

M

macker

Guest
i don't have a current account mortgage but have seen them advertised a lot lately. does anyone know how they work, i have read on this site that people effectively receive the same amount of interest on their savings as they are paying on their mortgage. i presume this is due to the money in the current account being offset against the capital element but when does this happen and how does it affect your access to your savings. thanks.
 
Hi Macker,

I have a current account mortgage. Your mortgage balance sits in one account and your savings/day to day finance in another. At the end of each day the balance on the savings is offset against the mortgage. So if you owe €200,000 on your mortgage but you have €10,000 in savings you only pay interest on €190,000. There are two types of payment to chose - either the "standard" repayment whereby they calculate how much you've saved in interest during the month and adjust your payment accordingly which means your mortgage will end at the original term OR the planned repayment whereby the full payment is deducted regardless of interest savings which will reduce the term and therefore the overall interest bill. You have access to your savings and can withdraw them at a ATM or at a First Active branch (by cheque only) but you can't go overdrawn and there is no cheque book. It's not really a product for people who spend every cent of their income each month but for those with savings it can reduce the term dramatically.

Sarah

www.rea.ie
 
I've been thinking of switching to one of these also. My situation is that I have a joint account into which I put a set amount each month. The mortgage is the only regular outgoing from this account. Other outgoings are yearly bills like bin charges and tv license and the like. The idea was to have a slush fund for anything needed in the house.

At this stage I have a few grand and climbing. I'm thinking I would be better off changing to a current account mortgage and letting the fund work for me. I'm guessing I'm ideally place for one of these mortgages?
 
Also something I only found out about if you owe 100K and your savings almost match your debt First active will automatically redeem the mortgage.This wasn't explained to me when I took out the loan.
 
Yes, I think there's some issue with First Active owing you money rather than the other way round......it'll be a while before I have that problem!!

Sarah

www.rea.ie
 
Sarah,
What do you think of Cyrstal's idea( http://www.askaboutmoney.com/showthread.php?t=20605) of, for example, getting paid on the first of thh month, living on the credit card and then paying off credit card in full at the end of the month - thus leaving your salary sitting in the account for the full month (of course ensuring that your monthly spending doesnt exceed monthly income by setting a credit limit on the credit card of less than monthly salary)?

Someone was saying that the higher interest rate of the current a/c mortgage would offset any savings??

Thanks

SB
 
I think it's a good idea - I tend to stick everything on my Tesco Visa which gives me loads of vouchers and clear it in full each month.

Sarah

www.rea.ie
 
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