HELP simple advice needed

shaman_2

Please be careful with me as do not really understand this mortgage lark I was thinking of switching to a one account as they reckon they can shrink my mortgage by years??? I am at present with the halifax on a home plan
my home plan is currently on track!

I originally borrowed 16,000 for the house (ex council) and at same time also borrowed an extra 7000 for improvements the house value currently stands at some 75/85,000

my home plan payment is currently £54.48 pmonth

but I also pay to Halifax £189.37 pmonth

This was taken out 04/99 and ends 04/2019

and i was wondering would i be better swapping to one account which says my motgage could be paid off in 3yrs!! I put £400 p month into a savings acccount

would one account take my £400 and use that money to reduce my mortgage???

srry to go on but as I say my understanding of these matters is somewhat limited thx in advance for any (simple please) advice

MortgageMamma

Hi there, depending on how much is outstanding on your mortgage an offset mortgage (one account or a.n. other brand) could be good for you, especially if you have an extra £400 a month spare. What needs to be carefully balanced out is if offsetting this additional money (do you have any lump sum savings?) is going to make the one account, or a.n. other offet/bank account mortgage any more efficient for you than perhaps a standard mortgage on which you can make a £400 monthly overpayment.

I would recommend you take advice personally from a whole of market mortgage advisor (someone who has access to all the mortgage deals in the UK and can advise you on which one is best for you) and let them use their expertise to take the strain for you.

MM

shaman_2

So would 1 account or similar take my £400 pmonth and use that as an extra mortgage payment therefore wiping out my savings or just use the interest on this amount????

herbiesjp

No they do not wipe out your savings. The money sits on your savings account - and you to not pay mortgage interest on the same amount of money on your mortgage.

Jays

herbiesjp wrote:

No they do not wipe out your savings. The money sits on your savings account - and you to not pay mortgage interest on the same amount of money on your mortgage.

Sorry to contradict, but this is not correct regarding 'The One Account', it does take the savings and pays it against the debt of the mortgage, hence it is called 'The One Account'. http://www.oneaccount.com/onev3/toa/toa-how.html

The good news is other offsets don't do this, as you say, they keep the savings separate but link the accounts when applying interest, most also link current accounts too.

Also, 'The One Account' is generally considered to have high rates.

EagerLearner

First Direct offer an offest account which also offsets your savings against the amount still owed on your mortgage, as well as offsetting any amount left from your wages against the mortgage etc. You may want to check them out just to compare.

The One Account was good when it came out (Virgin created it) but they have now sold it on and better rates can be found elsewhere.

Also speak to an Independent Financial Advisor who can let you know of many other offset mortgage suppliers if that's what you want to go for. They may also recommend other options - make sure they don't charge you a fee though, they should get their commission from the mortgage provider, not you. Also, as Martin says, make sure they are 'Whole Of Market' so you get the best array of choices.

If you have an extra £400 to put away every month, why not go for a shorter mortgage term but pay more per month - could be worth discussing with the IFA.

Good luck & keep us posted - up til 4 weeks ago I was a 1st time buyer, but we decided to hold off as it's too hard for 1st timers at the mo ;o(

EagerLearner

AndrewSmith

You mean a 'Whole of Market' Mortgage advisor.

Independant Financial Advisors do not necessarily deal in mortgages.

herbiesjp

Jays wrote:

Sorry to contradict, but this is not correct regarding 'The One Account', it does take the savings and pays it against the debt of the mortgage, hence it is called 'The One Account'. http://www.oneaccount.com/onev3/toa/toa-how.html

The good news is other offsets don't do this, as you say, they keep the savings separate but link the accounts when applying interest, most also link current accounts too.

Also, 'The One Account' is generally considered to have high rates.

Sorry if that was not clear - what I mean by it does not wipe out the savings is that once paid into the mortgage account they are still there for the OP to draw back out again. Not lost. STill there. You can go for the Flexible mortgage option with One Account or go for the full One Account

There are indeed numerous other lenders that can look at offsetting/current account mortgages, and these will still leave access to the funds for the OP as well

shaman_2

lol now u r getting me confused I have a core saving of £6000 which stays put never touched (personal reasons) and my £400 per month adds to this but I use it occasionally for hols coookers washers etc the buys that you need all of a sudden but would never drop below £6000 so would my savings from a £6000 base increase by £400 per month ot not? at present if i transferred would be approx £8000

jamesd

Shaman,

Lets consider an alternative to The One Account. Instead of putting 400 per month to pay off the mortgage, you instead put it into two of the highest paying regular saver accounts. Alliance & Leicester do one at 10% AER and Lloyds do one at 8% (AER?). 250 a month in A&L plus 150 a month in Lloyds and you end year one with:

A&L balance 3000 + 150 gross interest (or 120 net of basic rate tax)
Lloyds balance 1800 + 72 gross interest (or 57.60 net of basic rate tax)
TOTAL SAVINGS: 5022

Repeat each year using the best available regular saver accounts, leaving the money in the Lloyds one since it lasts two years, if it's still a good deal this time next year. I can't tell whether this is cheaper for you because I don't know your current mortgage interest rate or tax rate. Also, you might already be using these accounts for your 6000 core saving amount, if that isn't in an ISA. If you withdraw money from the A&L account it is closed; you can withdraw from the Lloyds account. A&L payments must be the same every month, fixed at the start; Lloyds can vary.

If you do want to concentrate on paying off the mortgage, you're probably better off committing to putting the maximum 250 per month into the Lloyds account because that will be a better deal by the end of year two, because you don't have to close it at the end of the first year but instead get to keep on making 8% on the total of the first year deposits. If you ever find that the rates on regular saver accounts aren't better than the mortgage interest rate, put that amount into the mortgage repayment instead (assuming your mortgage allows a lump sum payment).

shaman_2

at present my 6000 which cannot be touched is in a lloyds online saver which is around 4% so I believe what u r saying is that if I change my savings to these higher rated saving accounts I can then use the interest they accrue to increase the payments on my mortgage ( so shrinking it) that is if halifax will allow me to overpay? iyho how often should i take the interest and pay off mortgage monthly yearly or some other term? as would like to get mortgage off my back asap without breaking the bank :rotfl: