The One Mortgage

wymondham

many thanks for that!
a quick query is that if you leave say £1,000 in the bank each month this then assumes that you've overpaid - does this money disappear or can you get it back ??

tawnyowls

wymondham wrote:

excellent thread - many thanks for the discussion between you two!

I echo this - I'd done quite a lot of research into this before choosing The One A/C, and am relieved to find that bunkingoff's figures tally very well with mine, probably because I too am on a much lower rate (5.8%), not 6.45% (believe me, if it had been this, I wouldn't have touched it!)

bunking_off wrote:

I think there's also a psychological difference between mortgage + offset and current account. Imagine you have a £100k mortgage and £40k in your offset fund. With mortgage + offset you'd probably think "I'm paying my mortgage, and I've got equivalent of £40k so I'm well off" : you'd be more inclined to spend a bit. With a current account, you'd think "bl**dy h*ll I'm still £60k overdrawn, no spending for me until this thing's nearly paid off". Or maybe it's just me. What I would say is that for me, that attitude's turned a 25 year mortgage into something that'll be paid off in 10 on current plan.

I totally, totally agree. As I said in my earlier post, the first statement I received after we'd set up our salaries to pay into it gave me a second lightbulb moment, just like yours. It hammers into your head that this is a DEBT, and just because it's called a friendly name doesn't make it any less of a debt. We are now going to do our darnedest to try to live off a single income and pay our mortgage off in no more than 7 years (originally 10) and hopefully less (should get easier as more is paid off and so interest takes up a smaller proportion of our pay). We may decide to look at the Yorkshire BS one again in the future, but like bunkingoff, I'm willing to pay the extra couple of hundred for the convenience of not moving money around.

tawnyowls

wymondham wrote:

many thanks for that!
a quick query is that if you leave say £1,000 in the bank each month this then assumes that you've overpaid - does this money disappear or can you get it back ??

Yes, you can get it back. It's exactly as bunking_off said; it's a current account with a whopping overdraft. Just think of how you now manage your current a/c, and then imagine that you've run up an (agreed!) overdraft of £50,000 on that a/c. What do you do? You can still write cheques, buy stuff with your debit card, pay standing orders, as long as you don't exceed that agreed OD of £50,000. So your £1000 (and indeed any amount up to your agreed OD of £50,000) is available whenever you want it, without you having to ring up your mortgage company and get them to transfer the £1000 to a different a/c, which you generally do have to with an offset mortgage. Instead, you can just hand over your debit card and use that to buy something for £1000, or write a cheque for it, or do a bank transfer. It really does become very clear if you just wipe from your mind any notion of mortgages or savings, and just think of it as your main current a/c, but one currently overdrawn to the tune of however many thousands, and your aim is to get rid of that overdraft. You know how you'd do it if it was your normal current a/c, overdrawn by £2000 for instance - same thing, bigger scale.

bunking_off

Yup, tawnyowls is correct in his/her description.

My particular vice is fast cars. As I alluded to before, the flexibility of the One Account has allowed me to put a Porsche on Switch before now - simply a case of increasing the "overdraft".

NB1 frivolous this may be, but it was totally planned, and considerably cheaper than getting a car loan. As such, the One Account was an enabler rather than a driver to spending the money.

NB2 this is totally different to the numpties who put a car on their mortgage and end up paying for it over 25 years. As I say, I "overlay" various loans in my repayment plan with the mortgage (originally) over 25 years and any car loans over a much shorter period.

You can also do some fancy stuff : my wife wanted a car and what she wanted to pay dictated repayment over 5 years. However, the local dealer had a 0% offer, but only over 3 years. Solution? Structure it in the One Account (or at least my supa-dupa spreadsheet that carries our "plan") so that we repay the dealer over 3 years to exploit the 0% finance, but gradually in yrs 1-3 build up a car loan in the One Account representing the differential between the £300-odd/month repayment that a 3 yr loan requires, and the £250/month that she was willing to pay; in years 4-5 repay that loan that'd built up in yrs 1-3. Now that's flexibility...

ab7167

Wow! What a lot of advice. Has really given me a lot to think about with regard to what to choose, and will be running figures with OH tonight. Was revising all weekend for exam, the offer on the house has come at exactly the wrong moment as it looks like we may have to complete the same week as my exam....

And one more thing.... I'm a she, not a he!

Many thanks again.

Alex

wymondham

Excellent - much clearer now, it really does seem to be a very flexible account! I'm looking to change mortgage next april and this will be in the running for sure! (never want to change again after this - tired of hunting every 2 or 3 years and paying fees!!)

jamesd

wymondham, it's really a superbly flexible account. The price is the only disadvantage I know to it - otherwise I'd go for it myself. As it is, I'd pick an interest-only offset account to get really close in flexibility at lower cost.

tomstickland

I looked into offsert mortgages and they aren't worth it unless you have a lot savings. They don't pay you "5.5% on your savings", they just don't charge you 5.5% on the offset amount. For most people I'd expect a discount repayment mortgage to be a better option.

most claiming to be under 5%, but when you look at the APR, it's the same as the One account (5.8-5.9%), so how can they be cheaper?

They quote the full term APR, but the 2 year discount rate is usually a good way below this. Hence the APR is of no great use since you'll move once the initial rate is finished.

youreds

tomstickland wrote:

I looked into offsert mortgages and they aren't worth it unless you have a lot savings. They don't pay you "5.5% on your savings", they just don't charge you 5.5% on the offset amount. For most people I'd expect a discount repayment mortgage to be a better option.

Totally agree, I did some serious number crunching before switching from a Standard Life Freestyle Mortgage in January, to a Halifax (£0 fees & legals) mortgage at .29% above BR for 2 & a bit years.

I adapted a standard M$ mortgage spreadsheet to assist with the number chrunching & later did a version that includes ISA savings too.

Click here for the original post with the links.

One other thing to consider is if your OH is a non tax payer (mine is after packing up work to be a full time mum), is that you can put all the savings in their name & get the interest tax free.

HTH

Youreds!

tawnyowls

tomstickland wrote:

They quote the full term APR, but the 2 year discount rate is usually a good way below this. Hence the APR is of no great use since you'll move once the initial rate is finished.

Assuming it's worth it to move. The problem is, the fees that are now being charged (both arrangement and 'leaving' fees) come very close to wiping out any advantage of discount mortgages, precisely to try to cut down on rate tarting.