Keep as savings or bung in a 'One Account'?

Money_Cub

Hi all, any thoughts on the following....

I'm single and solely responsible for me, the house and the cats... for various reasons I changed to part-time work a year ago. I remortgaged (6 month deal now up) to get a better deal and took out £20k extra as a 'safety net'. I intended to take a certain amount of this out monthly to make up the shortfall on monthly income.

However, over the last year through MS'ing and other ways I don't actually need this £20K. Although because I'm PT I don't want to totally let go of it in case something happens and I'm stuck.

My question is: should I just save this £20k or remortgage again to a One Account. I am working to be mortgage free in the next 6 years and am trying every-which-way to get it down.

I know Martin isnt very keen on the One accounts but wld be grateful of any thoughts.

:undecided xx

bunking_off

I think you've got potentially 4 separate issues here that you need to decouple.

1. Do you put the £20k in savings or use it to pay down your mortgage?
2. Do you pay down your existing mortgage or remortgage at a lower level (e.g. borrow £20k less)?
3. If you remortgage, flexible, offset, current account or traditional mortgage?
4. If current account mortgage, use the One Account or another product?

On (1), unless you're willing to take some risk to get superior returns on savings, or you can get a mortgage where the rates are lower than typical NET savings rates, then you're better off using the money to pay down your mortgage. If your decisions to 2-4 don't allow you to get back at the £20k downstream, you might not want to dedicate all to your mortgage, and keep some back for a rainy day.

(2) depends on how good your current rate is, whether it allows overpayments, what the penalties are etc.

On (3), the fact that you're talking about being mortgage free in 6 years tells me that you should at least go for a flexible mortgage so as to have the freedom to make overpayments.

I'm a "One Account evangelist", but I'd concede that it doesn't offer the lowest rates and you have to make it work for you...be disciplined, play tricks to minimise your outstanding capital (stoozing, careful scheduling of payments etc). As such, it isn't for everyone.

tyllwyd

If you don't actually need the £20K, it seems an awful lot to borrow as a 'safety net'. I'm assuming that you have a good credit rating, so it wouldn't be difficult to raise money if something unexpected came up. In the meantime, you are paying a lot for this money when you think of the difference between borrowing and saving interest rates.

I don't know about the other mortgage options, but we have a One account. The benefits are that it is very easy to use and very flexible if you need access to cash. The downside is that the interest rates are a bit higher (make sure you don't borrow more than 50% of the value of your house to get the best rate) and it can be too easy to get hold of your money so you have to be very disciplined not to overspend.