The One Account?

teabelly

The one account isn't an offset. It works like a huge over draft facility. You don't make payments at all, and can't. Just by not spending you reduce your outstanding owed amount. The interest for the month appears as a debit just like all your other spending. Income is a credit. It works best when you pile in every penny you can and spend as little as you can get away with. Unless savings are going to earn you more than 10% before tax (more if you are a higher rate tax payer) then it pays you to keep it in the one account reducing your outstanding mortgage.

JoeShmoe_2

teabelly wrote: »

The one account isn't an offset. It works like a huge over draft facility. You don't make payments at all, and can't. Just by not spending you reduce your outstanding owed amount. The interest for the month appears as a debit just like all your other spending. Income is a credit. It works best when you pile in every penny you can and spend as little as you can get away with. Unless savings are going to earn you more than 10% before tax (more if you are a higher rate tax payer) then it pays you to keep it in the one account reducing your outstanding mortgage.

So for a capital and interest mortgage when do they take any money out of your current account to pay off the debt? Do they just calculate the amount owed as a % and then debit that from whats left in the current account at the end of the month?

wymondham

JoeShmoe wrote: »

So for a capital and interest mortgage when do they take any money out of your current account to pay off the debt? Do they just calculate the amount owed as a % and then debit that from whats left in the current account at the end of the month?

The One Account only ever take the interest payment out each month (regardless of the type of account you have with them). The capital is repaid simply by you not spending it - as each month goes by, you'll have money left over at the end of the month so your balance reduces gradually to zero, which is when your mortgage is paid. It is a very different way of paying the mortgage to normal, but can be very effective and is suprisingly simple once you get your head around the difference...

JoeShmoe_2

wymondham wrote: »

The One Account only ever take the interest payment out each month (regardless of the type of account you have with them). The capital is repaid simply by you not spending it - as each month goes by, you'll have money left over at the end of the month so your balance reduces gradually to zero, which is when your mortgage is paid. It is a very different way of paying the mortgage to normal, but can be very effective and is suprisingly simple once you get your head around the difference...

Thanks .. I get it now .. just an ever reducing large pot of money

However for me it would 'nice' to get a virtual idea of my monthly current account and savings .. so I know how much I am spending/saving .. how good are their virtual pots at showing this .. can you set then up on a recurring monthly basis (i.e show me how much ive 'added' to the debit since the 1st of the month .. thus giving me an idea of how much money ive spent this month)

wymondham

JoeShmoe wrote: »

Thanks .. I get it now .. just an ever reducing large pot of money

However for me it would 'nice' to get a virtual idea of my monthly current account and savings .. so I know how much I am spending/saving .. how good are their virtual pots at showing this .. can you set then up on a recurring monthly basis (i.e show me how much ive 'added' to the debit since the 1st of the month .. thus giving me an idea of how much money ive spent this month)

They have a really good website with lots of ways of displaying the information. I was like you and wanted to see things seperate ('how it's always been done' mentality), but once I had the account and saw the 'default' view showing the big picture - this has most of what you're asking. I did'nt really look any further into tailoring it so it would show things differently in virtual pots etc - has anyone else fiddled with the site to show this?

They do have a really nice line graph which shows EXACTLY what's going on ... of everything, this has been the main reason I liked the account - how odd??!!

jamesd

Joe Shmoe, with "We owe 250k on a house worth 400k. I end up with anywhere between 200-500 quid left a month" the One Account would be a very expensive mistake. That higher interest rate will be very expensive with such a large mortgage balance being repaid over as many years as it'll take with just a 500 a month overpayment.

With the amount you owe you should be looking to pay an initial arrangement fee to get a lower interest rate. A visit to a mortgage broker is in order unless you want to lose a lot of money.

Your situation is one where the One Account is about as wrong a choice as it gets - only those not overpaying would be placed in a worse position by it than you.

When comparing deals do ensure that you compare the total to pay, not the total interest saved by overpaying. More expensive deals have a higher total to pay and a higher interest rate saving by overpaying.

wymondham

jamesd wrote: »

Joe Shmoe, with "We owe 250k on a house worth 400k. I end up with anywhere between 200-500 quid left a month" the One Account would be a very expensive mistake. That higher interest rate will be very expensive with such a large mortgage balance being repaid over as many years as it'll take with just a 500 a month overpayment.

With the amount you owe you should be looking to pay an initial arrangement fee to get a lower interest rate. A visit to a mortgage broker is in order unless you want to lose a lot of money.

Your situation is one where the One Account is about as wrong a choice as it gets - only those not overpaying would be placed in a worse position by it than you.

When comparing deals do ensure that you compare the total to pay, not the total interest saved by overpaying. More expensive deals have a higher total to pay and a higher interest rate saving by overpaying.

valid point as it's not clear about remaining funds. Shmoe, how much money do you have at the end of each month if you did'nt save or pay the mortgage, but paid all other bills ?

JoeShmoe_2

wymondham wrote: »

valid point as it's not clear about remaining funds. Shmoe, how much money do you have at the end of each month if you did'nt save or pay the mortgage, but paid all other bills ?

If myself and my wife both paid into joint account (4.5k total) we would we have about 2.5k left at the end of the month. The amount I posted before was after the mortgage had paid first of the month i.e. it was additional savings. We are I would say very disciplined with our finances and have no ther debts (no cards, loans etc). We have 2 kids. On the best fixed rate I could find (5.9% with HSBC) we would get a £1678 monthly payment (400 capital, 1278 interest) with charges for overpayment

When I worked this out on a spreadsheet for the first 3 years I would be paying more interest per month but the amount owed would be about 5k less after 3 years? Isnt this the point? To pay less interest *overall* on the loan by paying it off quicker?

It seems to make good sense for us? Especially with out 3.5k savings being used as an offset. We also plan to use an ISA and some shares to hopefully pay off a 30-40k lump in about 5 years

The only things that worry me are a)the interest rate is tracked so what if they go up under inflationary pressure and b)having a clear veiw of spend per month so we can track where we are at any point

Appreciate your input

wymondham

JoeShmoe wrote: »

If myself and my wife both paid into joint account (4.5k total) we would we have about 2.5k left at the end of the month. The amount I posted before was after the mortgage had paid first of the month i.e. it was additional savings. We are I would say very disciplined with our finances and have no ther debts (no cards, loans etc). We have 2 kids. On the best fixed rate I could find (5.9% with HSBC) we would get a £1678 monthly payment (400 capital, 1278 interest) with charges for overpayment

When I worked this out on a spreadsheet for the first 3 years I would be paying more interest per month but the amount owed would be about 5k less after 3 years? Isnt this the point? To pay less interest *overall* on the loan by paying it off quicker?

It seems to make good sense for us? Especially with out 3.5k savings being used as an offset. We also plan to use an ISA and some shares to hopefully pay off a 30-40k lump in about 5 years

The only things that worry me are a)the interest rate is tracked so what if they go up under inflationary pressure and b)having a clear veiw of spend per month so we can track where we are at any point

Appreciate your input

2.5k (variable!) potentially coming off your mortgage balance each month is quite reasonable I'd say! If you micro-analyse the interest payments you'll probably find the One Account a tad more expensive, but only you can decide if you like the way it operates etc

JoeShmoe_2

wymondham wrote: »

2.5k (variable!) coming off your mortgage balance each month is quite reasonable I'd say! Contrary to above I would think you might be a good candidate. If you micro-analyse the interest payments you'll probably find the One Account a tad more expensive, but I thought it was worth it.

It is a little more expensive (not hugely) but I like the flexibility to overpay some months and underpay others which I cant do with a fixed rate

I understand I could overpay by standing order to a lower rate mortgage but then im not using the savings to offset the total amount of interest

I also like the fact that I can have savings .. which I can use whenever I want. If I overpay I can get that money back if and when I need it .. the flexibility appeals to me as we will take money in and out with a view to paying off a large lump sum in 5 years. I can also add my yearly bonus this way and can choose whether to spend it or not .. whenever I want

Im not sure we'll have it paid off in 7 years like the site says though :rotfl: