What type of mortgage allows money in a savings account to eventually reduce mortgage payments?

The Pledged Account Mortgage (PAM) is designed specifically to allow funds deposited in a designated savings account to be used to offset the mortgage balance, which can ultimately reduce future mortgage payments. In a PAM, the borrower maintains a savings account with enough funds that are pledged as collateral against the loan. This setup lowers the lender's risk and, as a result, can lead to a reduced interest rate on the mortgage.

With this type of mortgage, borrowers can benefit from having their savings not only work for them but also actively contribute to reducing the costs associated with their mortgage. The idea here is that the funds in the pledged account provide security for the lender, which in turn permits favorable terms for the borrower, such as lower monthly payments.

Other types of mortgages do not have this unique feature where savings accounts are used to decrease payment obligations in this manner. For example, regular mortgages do not link to savings accounts in such a direct manner, and progressive payment mortgages involve payment structures that increase over time without incorporating savings as a factor for payment reduction. Equity share mortgages, on the other hand, involve the sharing of equity in the property between the borrower and lender but do not utilize a savings account to influence payment amounts.

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