These new mortgages are: flexible, current account and offset mortgages. So how do they work?
Flexible mortgages
Basically, a flexible mortgage allows under and overpayments. Most will normally allow you to pay around 10% a year more than necessary. So, you can pay your mortgage off earlier. Or, you can take back some of the money that you have overpaid if you need to by taking a 'payment holiday'.
Terms vary from lender to lender as to getting back overpayments, so do check with a prospective lender as to how their product works.
Current account mortgages and offset mortgages work on the principle that you can pay less in interest by combining various aspects of your finances. As we all know, typically we get less interest on our savings than they we pay for our debts. These mortgages try and turn this around a bit.
Current account mortgages
Current account mortgages are basically one very large overdraft. How it works is that all your debts are combined with all your income in to one account.
So when you get your salary paid in, the amount of debt you have is reduced, so you pay less in interest. Of course, when you take money out, then your ?overdraft? increases and you pay more in interest.
However, it is a way of over or underpaying into a mortgage without any financial penalty.
As with a normal mortgage, you have to repay the debt by a set time. This can be done by gradually reducing your borrowings to zero (just like you would with a repayment mortgage).
Or, similar to an interest-only mortgage, you can use a separate investment such as an ISA to repay your capital at the appropriate time.
Do bear in mind that the rates on current account mortgages can to be slightly higher than the deals you can get for fixed rate or discounted mortgages. Therefore it makes sense to do your sums to ensure that a current account mortgage would be right for you.
Offset mortgages
An offset mortgage is different to the current account mortgage in that your current account, savings account, loans etc are kept in separate ?pots? from your mortgage.
Then you can decide whether you wish to offset all or one of these accounts against your mortgage. As an example, you could offset your current account and savings against your card debts and mortgage. You will then pay less in interest.
Like the current account mortgage, using your savings to reduce your mortgage can be quite tax effective.
So, are these mortgages for you?
Current account, offset and flexible mortgages are ideal for people on a high earners or those who have reasonably substantial savings. You also need to be disciplined and not be tempted to have a payment holiday and blow the money on a trip somewhere exotic!
New Types May Not Be Defined In A Return Type
-- Ecclesiastes 11:1
If you feed the future's potential for imagining and creating new harvests with the seeds contained in the fruits of the present, you can create new plenty where there is none today. In each case, you will do best when you abandon the outmoded ways as rapidly as possible in order to have more time and resources for creating and reaping future harvests.
Every business person has seen dwindling results follow from continuing down the same business model paths. At the same time, most have seen well-intended, costly efforts to build a better future business model fail to meet their objectives. You are in trouble if you don't change, and can get into even more trouble when you do change. What's a reasonable person to do in these circumstances?
The solution for new business model building is to pursue directions that offer many potential ways to gain. As a result, your downside risk can be that you simply end up with a less than optimal benefit, but one that leaves you ahead of where you are today. To reduce or eliminate the risk of losing ground requires focusing on new business models that add to your potential influence over business success, add to your skills and knowledge about how to do this, and get more people involved in making your business models successful.
Let's look at this question in terms of the advice that many give that you should teach a person to fish, rather than giving a fish, if you want to help more. But that's not really enough. It's just a way station.
When everyone knows how to fish, the potential supply of wild fish declines for everyone. A lot of time is wasted on unproductive fishing, as well.
Ultimately, fish becomes a dietary plague. Did you know that indentured servants in the United States from Ireland in the 19th century often negotiated for a limit on how many times a week they were served salmon, as one of the few rights they had? Otherwise, some masters would have served the then inexpensive salmon at every meal during the days when salmon ran thick in all of the coastal rivers of the eastern United States.
Let's apply this issue about harvesting resources to a business. If a business views getting fish as its objective, the same limitations occur. Organization will prosper most which learn how to fish for new, improved business models, that perpetually expand the supply of increasingly appealing, easily captured fish by using the new business models That's the ultimate fishing lesson!
You might think of this as the transition from one-time charity to helping people establish their own organic fish farms raising unique types of fish.
As important as that lesson about creating capabilities is, an even more important one is to help others learn how to create many other kinds of harvests, where none exist today. Think of this as beginning with an organic fish farm, and transforming it into a more productive entity, only one of whose offerings is fish.
Businesses can accomplish the same thing by creating multiple benefits from implementing the same activity in new, improved business models.
For example, many fish farms were begun in ancient times by throwing decaying, excess, and unappealing food and vegetation into small ponds that had been stocked with fish. The fish became a storehouse for those surplus calories in a form where they would not deteriorate until needed, during the times of the year when other sources of food and vegetation were scarce.
But you can get more than one harvest from a fish pond. On Kauai in the Hawaiian Islands, such ponds have also become an attraction at some tourist resorts. The fish are fed bread while the tourists eat their meals on adjacent lanais, helping to attract a larger turnout for the restaurant. In addition, the tourists enjoy throwing their excess food to the fish, as well, which reduces the labor and cost of feeding the fish.
Some might think that this bread should be fed to people, but the bread has been returned from diners' tables uneaten and should not be redistributed due to health regulations. So, the uneaten, served bread goes into the fish ponds . . . or into the dumpster!
The resorts sometimes loan fishing poles that allow putting bread on barbless hooks so that youngsters can try their hand at capturing and releasing the well-fed, tame fish. Children who have visited these resorts make a strong case for their parents taking them back on subsequent trips to either stay or eat there.
Undoubtedly, all those fish eventually find their way onto someone's plate as well. As a result, these fish ponds create several harvests at the same time.
More recently, this fish-pond-as-entertainment concept has been extended to improving human knowledge. Dolphins are very bright, and researchers know that humans love dolphins. Putting those two elements together, dolphin researchers on Oahu in Hawaii began developing experiments where volunteers with minimal training could help with conducting educational experiments with dolphins.
Many of these experiments involved teaching dolphins language, and required long periods of immersion in dolphin pools flashing signals and signs. Through Earthwatch, volunteers not only worked on the experiments, they also paid their own transportation and living expenses and contributed a fair share of the experiments' costs too! In the process, knowledge and fun were expanded while also boosting the local tourist industry in Honolulu.
How can you develop a larger set of benefits from each thing that your organization does?
Copyright 2009 Donald W. Mitchell, All Rights Reserved
Both James Miller & Donald Mitchell are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Donald Mitchell has sinced written about articles on various topics from Education, Insurance and Internet Marketing. Donald Mitchell is CEO of Mitchell and Company, a strategy and financial consulting firm in Weston, MA. He is coauthor of seven books including Adventures of an Optimist, The 2,000 Percent Solution, and The Ultimate Competitive Advantage. You can find fre. Donald Mitchell's top article generates over 33100 views. Bookmark Donald Mitchell to your Favourites.
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