Hit the accelerator?

By THIS IS MONEY
Updated:

 

We've been looking at a remortgage and have been offered a deal which involves an accelerator. Can you explain what this means and whether it is worth considering?

CC, Romford, Essex

Ray Boulger, technical manager at mortgage broker John Charcol says: With an accelerator you over-pay your mortgage every month to pay it off quickly and therefore save interest. Sounds sensible, but beware.

Some accelerator schemes are sold by companies which are not mortgage lenders. They may contact you by telephone, or at your door. In their schemes instead of making mortgage payments directly to a lender you pay the company a higher repayment instead. It pays the lender the standard mortgage payment and puts the rest into a savings account, then hands over a big extra payment annually.

But I know of no company running these schemes that does not charge fees that run from high to horrendous. In once case clients were being charged £6 a month just for the savings account scheme.

There are benefits to paying off mortgages this way but in schemes like this the costs could cancel them out. You could easily do it yourself more cheaply, or simply go for a flexible mortgage deal that lets you overpay if you like but also gives other benefits like payment holidays.

Always be suspicious of any schemes sold by cold calling at your door or on the phone, and always ask if the company subscribes to the Mortgage Code (and check - don't take their word for it). Anyone offering mortgage advice

should operate within the code.

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