Considering change of mortgage to One Account

uberalles

Good morning all,

Forgive me if this is already explained elsewhere within the Forum but I am somewhat of a novice with mortgages.

Our situation is this:-
1. We took out a £220,000 mortgage in March 2004 at 5.49% Fixed until March 2011 when we are free to go elsewhere. Feasibly, we have 21 years left, it was a 25 year mortgage.
2. We have vastly overpayed and owe now £120,000 and have £5,500 penalties to get out the mortage.
3. Our repayments, on a repayment basis, are £1350 pm and we continue to do this. This means feasibly our repayment period terms are down from 21 years, which should remain, to about 6 years. Alternatively we could pay back about £750 pm instead.
4. We aim to overpay 10% each year, which we are allowed to do, and at current repayment rate of £1350 pm, hope to be mortgage free within 6 years.
5. We save about £**** pm.
6. We have savings of about £**** , not currently earning a lot of interest. although they are in cash ISA's.

So, my question is, based on what I have said, which I hope is sufficient to make a judgement call, do you know of any products that could shrink overall the interest paid back over the next few years, on our current mortgage?
Consideration needs to be made for the £5,500 penalties to get out the mortage.

I have looked at the One Account and whilst I see in the forum lots of people have concerns, I wonder if it still makes financial sense.

Our final statement of potential savings on the One Account, based on all the above, and the value of the house (£******) is this:-
1. It states it can clear our mortgage in 5 years 10 months .
2. It looks like this is without over paying.
3. I assume, and this is where I may be going wrong, that the £15,000 savings lump sum I originally put into the account, will still be there. Then the £1000 per month moving forward , total £70,000 (5 years 10 months = 70 months * £1000 ) will still be there in 5 years 10 months for me to withdraw although I appreciate I won't have earnt interest on it.

It looks too good to be true, am I missing something here , or can I really be clear in 5 years 10 months without overpaying?

Thank you for taking the time to read this and for any feedback.

getmore4less

Look at other offsets the one account has never been a best buy, if fact most of the time it has been a bad buy.

Look at Barlcays and First Direct then a few others.

I have not had a good look at your post yet but the oneaccount calculator is misleading so make sure you have done the sums right.

OK had a read,
First you are going to have a lot of surplus funds when you have paid of the mortage and are likely to be high rate taxpayer.

I would preserve the ISAs and fill them every year unless you are using your allowance in a MAXI ISA.

Some offsets allow ISA's to be offset Barclays is one of them.

£5500 penalty is a fair chunck to save by reduing the rates and there will be the exit fees for changing lender and new mortgage fees to add to that.

I will do the calcs for this next.

uberalles

getmore4less wrote: »

Look at other offsets the one account has never been a best buy, if fact most of the time it has been a bad buy.

Look at Barlcays and First Direct then a few others.

I have not had a good look at your post yet but the oneaccount calculator is misleading so make sure you have done the sums right.

getmore4less, thank you, I will do.

getmore4less

Assumptions to make the calcs a bit easier and so the comparisons are fare.
Current mortgage is

£120k fix 2years(2011) 5.59% 21y term

I make this £803pm not £750. anyway asuming the rate does not change paying

£1350 this will be paid off in 115m, 9y 7m
£2350 this will be paid off in 59m , 5y 11m

but since you can change in 2 years we need to do some 2y calcs to compare any alternative.
£1350 after 2 years you owe £99,729.81
£2350 after 2 years you owe £74,423.71

First direct offset is currently a good one to compare with.

base + 1.89(2.89%) £799 fee lets say £1k to account for the exit fee and add on the £5500 erc new borrowings are £126500

£1350 after 2 years you owe £100,704.43
£2350 after 2 years you owe £76,027.84

So you cannot make up the fees in 2 years on the mortgage alone but the offset will help a bit. if we offset £15k (so still have this as savings)

£1350 after 2 years you owe £99,812.99
£2350 after 2 years you owe £75,136.40

SO this gets it closer but you lose whatever interest you get from the ISA.

I would stick with the deal you have and review in 2 years.

You could reduce the term to allow you to increase overpayments but I would fill the ISA if not using the allowance this will be tax free for life, savings on the mortgage are only going to be for 6 years at this payment rate.

getmore4less

uberalles wrote: »

1. It states it can clear our mortgage in 5 years 10 months .
2. It looks like this is without over paying.
3. I assume, and this is where I may be going wrong, that the £15,000 savings lump sum I originally put into the account, will still be there. Then the £1000 per month moving forward , total £70,000 (5 years 10 months = 70 months * £1000 ) will still be there in 5 years 10 months for me to withdraw although I appreciate I won't have earnt interest on it.

It looks too good to be true, am I missing something here , or can I really be clear in 5 years 10 months without overpaying?

Thank you for taking the time to read this and for any feedback.

OK you have £120k to pay if we assume no interest at a payment rate of £1350 that is a min of 89months(7y5m) and at £2350 it is 51months(4y 3m) so there is no way that after 5y10months you could have £80k+ in savings and no mortgage

What the caclulator shows is when you are 100% offset so the money is not there to take out.

I use http://www.whatsthecost.com/mortgage.aspx and put in numbers that match the real payments then look at the details to get the results in the above post.

uberalles

getmore4less wrote: »

I would stick with the deal you have and review in 2 years.

You could reduce the term to allow you to increase overpayments but I would fill the ISA if not using the allowance this will be tax free for life, savings on the mortgage are only going to be for 6 years at this payment rate.

getmore4less, well, what can I say, thank you very much indeed. :T

You have done more than enough to help. Not only have you concluded what I did think was probably too good to be true, based on the figures, but also helped me understand how it all works out.

You are very kind, it is appreciated.