The benefits and risks of a UK current account mortgage loan

A UK current account mortgage allows you to keep your loan, and current account balances in separate accounts, but where the current account balances are linked and are offset against the loan balance. You only pay interest on the net loan balance of the combined accounts. The UK current account mortgage allows the possibility of reducing the monthly interest  payments, or repaying the loan early. An offset mortgage is a similar type of mortgage  but where your loan balance links to and is offset by not only a current account balance but also savings accounts.

For the UK current account mortgage the interest is calculated daily, so that paying your salary into a current account which links to the UK current account mortgage will save on interest payments as your normal cash flow temporarily reduces the outstanding debt each month.

benefits

Typically, a UK current account mortgage will lead to lower interest payments providing you have a regular cash flow through the linked current account.

All positive balances are offset against the loan. Most providers allow you to set up multiple current accounts, so each working member of a family can have their salaries paid into individual accounts all offsetting against the mortgage for the family home

risks

You will not receive interest paid into the current accounts. However savings interest rates are almost always lower than borrowing rates and when you compare the potential in mortgage interest savings with the miniscule amount of interest paid on current accounts by the big banks, this will far out way any interest you might have received

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