The One Account - can anyone tell me if I'm going mad?!

Cleaver

Maybe in the 12 years since doing GCSE maths some of my brain cells have faded, but can anyone help me with some maths as this just doesn't seem right to me!

The missus and I want to move to The One Account in January and get out mortgage paid off. I went to their calculator at http://www.oneaccount.com/onev3/calculator/index.html and put in our particulars:

House Value: £120,000
Amount to Borrow: £54,500
Total Joint Income Per Month: £4,200
Total Income Left Each Month After All Outgoings: £2,300
0% increase on payments each month
0 savings paid in to the account
no lump sums or other incomes

Now, when I press the 'show me' button it tells me that we could pay off our mortgage in 1 year and 8 months with the total amount repayable being £57,383

How can this be? Even if the interest rate is 0% and all of the spare £2,300 goes towards the mortgage, £2,300 per month multiplied by 1 year and 8 months comes to £46,000. So how would the original £54,500 be paid off?

I'm confused! I know there's some haters and lovers of this account on here, so maybe one or the other could help me out!

hotblu

Hello Cleaver,

Not much of a mortgage expert, but wouldn't the difference that your querying be repayments that you are making?

Cleaver

hotblu wrote: »

Hello Cleaver,

Not much of a mortgage expert, but wouldn't the difference that your querying be repayments that you are making?

I'm clearly no expert either (!) but I think the idea with The One Account is that you do all your spending, then any money left in your account is your mortgage payment.

It's why its a bit of a poor account for people not in control of their spending, as your mortgage could never get paid at all. Or, even worse, increase!

hotblu

I was always under the assumption with these types of account that you have a fixed repayment amount each month and anything left over reduces your mortgage term.

Cleaver

hotblu wrote: »

I was always under the assumption with these types of account that you have a fixed repayment amount each month and anything left over reduces your mortgage term.

I thought that was offset mortgages, but what you say makes sense. I'll have another read of the small print methinks.

hotblu

Cleaver wrote: »

I thought that was offset mortgages, but what you say makes sense. I'll have another read of the small print methinks.

I need to change mortgage in December and had a look at the natwest one...

http://www.natwest.com/microsites/personal/mortgage_shrinker/whatisit.asp

It mentions taking payment breaks, so I think you do have a monthly repayment, then it takes into account money left over etc.

HTH

Hotblu

wymondham

Cleaver wrote: »

I'm clearly no expert either (!) but I think the idea with The One Account is that you do all your spending, then any money left in your account is your mortgage payment.

It's why its a bit of a poor account for people not in control of their spending, as your mortgage could never get paid at all. Or, even worse, increase!

Exactly correct, whatever is left at the end of the month is considered your mortgage payment - nothing happens with it though, it stays in the account, but your account moves nearer to credit by this amount (they do take an interest payment each month, and this is the only money that 'goes' anywhere..)... it's an odd concept to get you're head around, but it works very well for some (including me )

wymondham

hotblu wrote: »

I need to change mortgage in December and had a look at the natwest one...

http://www.natwest.com/microsites/personal/mortgage_shrinker/whatisit.asp

It mentions taking payment breaks, so I think you do have a monthly repayment, then it takes into account money left over etc.

HTH

Hotblu

This is pretty much the same as the One Account. All owned by RBS

Cleaver

wymondham wrote: »

Exactly correct, whatever is left at the end of the month is considered your mortgage payment - nothing happens with it though, it stays in the account, but your account moves nearer to credit by this amount (they do take an interest payment each month, and this is the only money that 'goes' anywhere..)... it's an odd concept to get you're head around, but it works very well for some (including me )

I've just been reading the other threads on here about it, including some useful ones from your goodself.

So Mr / Mrs Wymondham, are the figures quoted above correct? They can't be can they?

wymondham

Cleaver wrote: »

I've just been reading the other threads on here about it, including some useful ones from your goodself.

So Mr / Mrs Wymondham, are the figures quoted above correct? They can't be can they?

I'm not a lover of the shrinker calculator - it assumes best case scenarios. Did you say you have any savings to start with when you filled it in?

Basically, add up all your income, inc savings etc... (to work properly you need to use this account only), then take away your monthly outgoings. The figure left is how much your mortgage will reduce by a typical month (this will obviously be quite variable). As the mortgage reduces fast, the interest payment they take reduces quickly as well so it does snowball .... hope this explains things a bit, but let me know if any other questions..

Mr Wymondham (:D )

Cleaver

wymondham wrote: »

I'm not a lover of the shrinker calculator - it assumes best case scenarios. Did you say you have any savings to start with when you filled it in?

Basically, add up all your income, inc savings etc... (to work properly you need to use this account only), then take away your monthly outgoings. The figure left is how much your mortgage will reduce by a typical month (this will obviously be quite variable). As the mortgage reduces fast, the interest payment they take reduces quickly as well so it does snowball .... hope this explains things a bit, but let me know if any other questions..

Mr Wymondham (:D )

Yeah, that's pretty much what I did! We will be using all of our savings just pay off a lump sum just before moving to The One Account, so no, we'll have no savings.

The figures above are correct figures of how we'll be doing things and I still can't work out how it gets our mortgage paid in 1year and 8 months!

Mr Cleaver