One Account mortgage repayments

paulie_pudding

I have a RBS One Account where my current account is linked to my mortgage. Its quite good and its satisfying to see the balance offsett against a large debt each month. I have a question though.

I am borrowing at present; 83% of my value of my house. I have £3000 in a business account but not paid my income tax for this year yet - (I probably owe the IRS about £2500.) Do I though try and bring my facility (currently £72250) down to £68000 which wouldn't normally happen til next March. I am at £69300 at present. Paying in £1300 now would reduce my reduce my interest on this the balance by 0.1%. But my question is how much would this 0.1% equate to in 12 months and is it worth taking money out of my business as drawings?

JA1000

IRS????

This is the UK not the USA

waveneygnome

Hi Paulie_Pudding,

I think I understand what you are asking......so I'll have a go at answering.

For those who don't know, the RBS One Account has tiered interest rates (in theory to reflect the relative risk to RBS), based on the LTV ratio.

Current rates are:

Up to 50% 3.65%
50.01% - 75% 3.75%
75.01% - 80% * 3.85%
80.01% - 85% * 3.95%
85.01% - 90% * 4.10%

* means rates available to exisiting customers only.......new customers I think have to have min 25% equity.

You are currently paying 3.95% (is this correct?).......but if you put in an extra 'lump' of equity (from say your business account), and formally reduce your facility, you will drop to a lower tier of interest.....saving 0.1%.

You ask what difference it will make over 12 months......well the new facility you propose (mortgage amount) will be £68,000, and you will save 0.1% over 12 months = save £68 per year.

As to whether it is advisable to take drawings from your business is another matter. I am sure there would be tax implications....if you took out £1300 as a dividend or salary...or even if the company was to 'loan' you the money. Unless you know about the tax side of things yourself, its probably not worth seeking (paying for) professional advice (accountant) in order to save approx £68 per year.

I have a One Account, and run my own business, and had £25k in business desposit account earning next to nothing. I did speak to my accountant about slushing it over to my One Account...but the advice I got was that by the time I have paid the company a 'commercial interest rate', and/or declared it to HMRC as benefit in kind, and paid accountant to handle all the paper work.......it wasn't worth the effort.

Its good though that you are thinking this way - maximise the flexibility/features of the account......and reduce you mortgage/interest payments.

Regards
WG