It's the first such mortgage with internet banking to be made available to Guernsey residents. The mortgage offers borrowers the potential for significant interest savings and a reduced mortgage term.
Current account mortgages, which originated in Australia, operate from the same current account that you pay your salary into. You only pay interest on the balance of your account, and therefore you can use your income and savings to reduce your mortgage balance. If you had a mortgage of £400,000 and savings of £20,000 in your current account, you would only pay interest on £380,000.
By doing this, you can reduce the interest you pay on your mortgage, and the term of your mortgage. For example, if you had an annual gross income of £100,000 and a bonus of £10,000 with monthly expenses running at £4,400, on a mortgage of £400,000 at their present rate of 5.875%[1] <#_ftn1> per annum, potential interest savings are £120,000, reducing the term of the mortgage by some 7 years on a 25-year mortgage.
Along with being able to make additional payments, the Butterfield Current Account Mortgage allows you to draw down funds from your mortgage account up to the permissible limit. This means you can use their mortgage to pay for other items, such as a car or holiday, at lower rates than conventional loans.
Commenting on the introduction of the mortgage, Mark P Stevens, Head of Lending Services at Butterfield Bank Guernsey: “This is the first time that Guernsey residents have been able to choose a current account mortgage that has the benefit of 24/7 internet banking. This type of mortgage is immensely attractive, and is already popular in Australia and the UK. The benefits are obvious - you save interest and significantly reduce your mortgage term. Moreover, you can effectively make additional payments or draw money down when you need to, giving you flexibility to achieve your financial goals.”
