The One Mortgage

ab7167

Now,

I've been doing lots of calculations, and my head is now hurting. Although I do have a mathematically inclined job (structural engineer), this mortgage thing is a bit beyond me at the moment!

Me and OH are about to take on a £207500 mortgage, and are considering the One Account. We want to hammer the mortgage as much as possible for 2 years, and then think about having children, when we would like it to be more flexible. At the moment, we have lots of little savings account for things like holidays, car insurance and christmas. I've read Martin's thing about offset only being useful if you have large amounts of savings which we don't (or won't after buying the house!). However, we can overpay directly by £500 per month, and the additional savings accounts have around £300 per month going into them.

Would I be right in saying that we would effectively overpaying £800 by using the One account, instead of £500 traditional mortgage. Trouble is, we do need fairly instant access to our savings, so borrowing back overpayments would be a pain. Also, we both tend to leave a couple of thousand lying around in current accounts, this will count as well will it not?

We have to make the decision fairly soon, as our vendor's solicitor is wanting to know when we will exchange. Credit should be no problem, our combined income is £73k, with no other debt. I think we have been quite lucky for being only 28.

Help!

Alex

ab7167

The debts mentioned below will be cleared by christmas, and then we will have an extra £250 to throw at it as well. Plus I am sitting professional exams in a month, if I pass I will get a £5k payrise that can all go on overpayments.

Alex

phizzimum

We have this type of mortgage with the Woolwich/Barclays and I can't recommend it highly enough.

You can chose to link all your accounts to your mortgage, and as you say, any money in them is counted as being taken off your mortgage but you have the same access to them as usual. It means we don't have to worry about whether
we should keep hold of the money just in case something crops up.

DH is self employed so the money we save to pay our tax bills and VAT is saving us interest every month.

when I read posts on here and people can only overpay certain amounts at certain times or get charged to overpay :eek: I'm so glad we chose the mortgage we did.

begbeer

Think this type of mortgage has a higher interest rate than some, you might be better of getting a discounted rate.

phizzimum

good point...ours is a baserate tracker mortgage. At the moment I think our interest rate is 5.25 percent...does that sound right I haven't checked it!

chickadee

Hi, I have a one account mortgage. You say that borrowing back overpayments will be a pain, however it couldn't be more simple. You just spend the money! You don't have to apply to increase the outstanding balance, you just do it. These types of mortgage are only for people who have both the discipline and understanding of the product to make it work. You could make no repayments at all if you like and the one account won't chase you (within reason). You have to make it work. It is like having a huge overdraft really. A bit scary when you draw money out of a hole in the wall and it gives you a balance though!

Good luck, I hope you get your house.

dave318

We also have the One account for our mortgage, baut I am sure there are similar products out there that have lower interest rates.
If you can be throwing an extra £800 to the mortgage every month then this type of product would be good for you, but do sho around as you could get a better deal, but similar mortgage, elsewhere.

Dave

karom

When we remortgaged a year and a half ago we considered this type of account and settled for a tracker mortgage (0.45 above bank base rate) instead.

Reason:
- We called IF and how many years would we gain on a 25 years mortgage for 100K if we keep 10 or 20K in savings. The repayment per month was X and we gained 5 years.
- We called a different mortgage company and asked for their normal mortgage (nothing fancy at all) and deducted the 10 or 20K from the 100K balance for a period of 20 years -> the monthly repayment was much less than option 1.

Conclusion we dropped the idea of option 1 and went for a tracker instead. We make overpayments throughout the year to decrease the term.

Good luck

phizzimum

yes, with DH being self employed the flexibility suits us, we can get a reduction in our term but still have the money in our accounts.

checked and our interest rate is 5.25 percent. Ashamed to admit that i hadn't really thought about whether that's a good rate or not.

jamesd

ab7167, The One Account position is fairly simple: if you use that mortgage you will pay about 2,000 a year more in interest than if you instead get a competitive offset mortgage from a different vendor.

Any offset mortgage will let you put savings into the offset account and treat it just like a savings account, earning no interest but saving you the interest on that much of the mortgage amount.

Assume for the sake of argument that you had 10,000 total in current accounts. That would reduce your interest payment on the One Account by about 6% of 10,000 or 600, not anything close to the 2,000 you're losing by having the more expensive mortgage in the first place. If your money normally earns interest in your current accounts (4% is easy enough to get these days) then the benefit of the One Account current account property falls to just 200-400, depending on income tax rate.

If you're overpaying by 800 a month the funds available to you in a normal offset account will rapidly rise to very useful emergency spending or repayment holiday levels, matching the benefit you get from the One Account. Since you want easy access to your savings it's better to put all of this overpayment into the offset account instead of paying some on the mortgage and putting some in the offset account.

Its flexibility is great but the poor interest rate makes the One Account a sucker's mortgage for most people, looking good only because they see the savings calculation and don't compare it to the deals available elsewhere.

mikeywills

We got an offset mortgage when we moved house, and borrowed additional money, to do work on it. In affect we have borrowed a further 20K which we can access at any time without it costing us anything. As we are waiting for planning to go through 6 months and still waiting!!, it has saved us a considerable amount of interest on the mortgage (which if we put the money into a high interest account we could not have achieved the same result).
Combined with a savings pension fund, a saving college fund for our daughter and a rainy day fund, we have a considerable amount of savings set against our mortgage, for which we have easy access at any time. You can also make your current account work for you too, if you get a cashback credit card. We utilise this to pay for all our monthly necessities and only pay it off in full at the end of the month. This means that our salaries remain in our current account earning the equivalent interest rate of our mortgage, as interest is calculated daily on offset mortgages, and our credit card is earning us 2% cashback to boot. The only negative is you dont get any interest on your savings or current accounts, but at present there isn't an isa, current account, or long term savings plan which can match our mortgage interest rate which is fixed for 10 years.
If in the meantime interest rates change and there are better savings to be made elsewhere you can move all of your savings accordingly.
I would recommend an offset mortgage to anyone that have good levels of savings, with all combined costs our money is saving for us at approx 7%.
If you can do better on instant access let me know.