The One Account?

monkeyman120168

:j Thank you for helping me out Freedom Girl. I was doing it late at night & was worried I had missed something as the figures seemed so amazing!! I really appreciate your help with this.
I am quite disciplined with money (she says after going into B&Q y'day to buy a curtain pole & coming out having bought two bathrooms!!!!) so I think we will be ok with the account. I always save for Xmas, bills & holiday each month & if any money is left this goes to wards the mortgage - fingers crossed we can be disciplined. I think going to the bank & seeing how much we are overdrawn is a fabulous incentive for anyone to not spend unnecessary money:eek: :eek: ........
I have a list of questions for the bods at the One Account and am going to give them a ring this afternoon & then if all looks ok will take the plunge & be (hopefully) mortgage free by 2014:D :j
Thanks again for your help - you are a star!!

bunking_off

monkeyman120168 wrote: »

I apologise for possibly asking silly questions but hubby & I are intrigued by the one account. Have just typed in details & the reduction in the time to pay off our mortgage seems too good to be true (& in my experience if it looks too good to be true, it usually is!!!). Having just reduced the cost of our life cover for the mortgage & general life cover also, we are desperate to reduce our outgoings as much as poss & chuck as much money as we can at the mortgage. Could I ask for help from some of the more experienced money savers out there??
House value £265000 (don't know if that's relevant but just in case...)
Mortgage £86000 - 18 years to go
Income £2700 net into bank each month + any money from sales on Ebay!
Anticipated money left over £750 per month (I take it you include your current mortgage repayment in this figure as you are not effectively making a payment?)
Savings to go in £3000

The one account has calculated we can repay our mortgage in 5 yrs, 10 months - nearly fell over!!! Can this be right?

I fear not. Think about it this way...£750/month = £9,000 per year = 52,500 in 5 years 10 months....so you'd be doing well to pay off a larger debt than the money you're paying in.

I'm not familiar with the online calculator, but suspect the issue is that the "money left" is after your normal mortgage outgoing, not including it...doing some broadbrush assumptions about your current mortgage does tend to indicate that if you left your current outgoing + another £750/month in the OneAccount it'd be paid off in 5-6 years.

If, however, the £750 you have left includes your mortgage payment (e.g. if your current payment is c£650 and you have another £100 left over), then a realistic pay-off time is approx 13-14 years.

FreedomGirl

Hi,

Suggest you get the calculator out as well, and start seeing how sensitive the numbers are to you leaving less than £100 in (i.e. showing how the mortgage term goes up, too).

I wouldn't trust those predictions until I could reproduce them myself a calculator. And, you may not get the full benefit of the One Account until you understand how the interest calculations work, and can adjust your financial behaviour accordingly. I'm not talking about really accurate stuff, so don't panic

What you have is two things going on at the same time

1) A mortgage repayment, interest and capital, with a reducing balance
2) A savings account with increasing capital

Here's a (really rough and ready) example. I've put the numbers into a calculator myself, and already have found some discrepancies (probably because I haven't included your savings in this calculation)...

Everything is calculated on an 18 year term (and I've round stuff to the nearest tenner as well).

You start with 86000. You pay 12 x 470 interest (calculated by taking 6.6% of outstanding loan) and you pay 12 x 210 capital repayment. You also save 12 x 70 month.

Balance at end of year 1 is 86000-25290-840=82640

You then pay 12 x 450 interest and pay back 12 x 220 capital. You also save 12 x 80/month.

Balance at end of year 2 is 82640-2640-960=79040

You then pay 12 x 430 interest and pay back 12 x 230 capital. You also save 12 x 90/month

Balance at end of year 3 is 79040-2760-1080=75200

OK - hopefully that makes it a bit clearer. You can see how, if you spend a couple of grand on a holiday/car/new boiler/new bathroom:D it will completely muck up your reducing mortgage balance.

Now try the calculations yourself using the link below and do it for a 5 or 10 year term..

https://service.oneaccount.com/DAPP/payments.do

For example, to pay off in 10 years, you would pay 12 x 450 interest, and need to leave 12 x 500 capital repayment left over in the account to be on schedule. Which I don't think would fit with your budget?

You must be thinking - hey, this doesn't tie up with what the calculator is telling me :mad:

There is the trick with the One Account predictions (and I think it's unfair because they don't really point out how you get the extra financial "kick" to reduce the term)

Let's say for example you have a balance of 84000 in the month of September next year.

Interest for that month would be 84000 x 0.066/12 = 462

But, your Auntie Anna gives you 1000 to look after for half the month, and you put it in the One Account

You then pay the original interest for half the month

84000 x 0.066/12 x 0.5 = 231

plus half the month with a slightly smaller balance

83000 x 0.066/12 x 0.5 = 228.25

Thus saving 462 - (231 + 228.25) = 3.25 in interest

This is the trick that's repeated again and again. Even if a salary of 2000 is in the account for one week out of the month before it gets spent, that's roughly 2.50 in interest saved.

And every pound in interest saved means that there is one more pound to pay off the capital.

As you say "every little helps"

Once you have your head around this micromanaging of your cash to keep as much as possible in the One Account, then (and this is where the financial attitude part comes in) you can see that delaying purchases will help reduce the interest.

But definitely get your head around it before going ahead and don't just rely on what I'm telling you ('cos I might have made a mistake in my calculations for starters).

And get that calculator out:p

FG

jamesd

monkeyman120168, the calculation is probably entirely fine and accurate. What it doesn't do is compare the total cost to you with the total cost to you of a mortgage with a lower interest rate, or how much less time it would take to pay it off with the same monthly payments on a mortgage with a lower interest rate.

No problem except that you're not comparing with anything, just being impressed by how fast you can pay off any mortgage if you make large overpayments, while looking at one of the most expensive mortgages available, one that Martin specifically recommends not using in his mortgage and remortgage guides.

Before concluding that the One Account will save you money you should look at some of the better deals that are around and see how much more money they can save you. Just go and look at a range of mortgages from different lenders and compare the total amount paid and total time to end the mortgage for any specified total monthly payment (required amount plus overpayments), using exactly the same payment for them all.

You can expect that most competitive deals will let you pay off the mortgage more quickly and at lower total cost than the One Account.

wymondham

jamesd, whilst all you say is true, the One Account changes the way people live and view their finances, something other types of mortgages do not - the percentage rates are not the whole story (quite low down on my list). I think 'money people' often miss this point completely, comparing x against y etc....

Also whilst Martin is the moneysaving expert, he is not a lifestyle expert and I don't think it's very healthy to assume all he says is correct for everyone - I'm sure he'd agree. I went for this 'against Martins view' and it worked for me - maybe I should get a T shirt done?

I switched to the One Account and finished my mortgage in 9 months, I could not have done this with other accounts without the time needed to managed them.

Sure it's not right for everyone, but people should be mature enough to see if/how it works and figure it out for themselves.

The One Account is not the cheapest account around as we all know, but it does focus the mind in a way others don't about getting rid of your 'debt', not 'mortgage'.

Now I've used a One Account it makes general mortgages seem crazy, illogical and inflexible (even the 'flexible' ones!). After years of working with bad mortgage companies who offer poor expensive service, the One Account have a top notch customer service dept which blows the rest out of the water as far as I can see.

This is just my opinion but I just wanted to put the other side of the story over....

ps: I have no tie in with them, just a satisfied customer!

dollydoodah

Thanks to all who have contributed to this thread - the One account certainly looks interesting, although not for me.....I doubt I am disciplined enough

I do want to ask a question though as I was telling a friend about it earlier today. She has a £120k mortgage, no debt and about £35k savings. She has a wage of £25k p.a. and £500 month rental income.

Unfortunately, a few years ago she had real finiancial difficulties (thanks to her ex husband swanning off) and as she was such a mess at the time, buried her head in the sand and ended up with 2 CCJ's and a number of defaults. She is now on a sub-prime mortgage which doesn't allow overpayments (I think that is what she called it). Now the debt is all paid off as a result of her parents sadly dying within a few months of each other and she is fanatical about having no debt and reducing her mortgage. This account would be ideal for her as she is so disciplined about money and has quite a bit of surplus each month, plus obviously her savings. Thing is, she doesn't believe that she will be eligible for this because of her past credit history and doesn't want to apply and have a footprint on her credit record.

Does anyone know if it is worth her applying or not to bother? The debts, I *think* wer paid off about 15mths ago so obviously the CCJ's will be on her credit record for quite a few years yet.

Thanks all.

monkeyman120168

Freedom Girl - Wow!!! Thanks so much it genuinely does give me a fuzzy feeling that other people out there will take the time & effort to help me & hubby with our dilemmas over whether to go with One Account or not. Having calmed down from our initial excitement we are now reading all the lovely useful info being pinned up & are beginning to have our doubts now. Myabe we are just getting carried away - have set up our mortgage pig, reduced lots of other DD's. We have looked at our current lender who have good offer on at mo & we always have option to overpay up to £500 mth with them. Am going to wait for the info from one account & speak with our lender (have already been on comparison websites) then make a decision. Dont want to be regretting a moment of spending madness on the one account. But thanks again for all your help & calculations - you are very kind.

jamesd

wymondham, paying your mortgage off in nine months means that you didn't get to pay much of that higher interest rate. It's a different story for someone who will take about six years to do it. Some people definitely do like the way the One Account works and strongly prefer its current account mortgage style to others.

monkeyman120168, many lenders also let you reduce the mortgage term and overpay more than 500 in that way - the shorter term raises the monthly payments and the 500 is on top of those higher payments. So you could set the mortgage term to whatever gives you your minimum expected overpayment each month and then use the 500 as the flexible range. If the mortgage interest rate from this lender is below the best cash ISA rates you can save some more money by not moving cash ISA money into the mortgage but instead keeping it in the best cash ISA.

dollydoodah, she should have a word with at least two different mortgage brokers and see what they can come up with. Until the credit crunch debt that was a few years old wouldn't have blocked her but now it may be tougher, depending on just how long it was since the CCJs. If she asks for her two Pound statutory credit reports from the main credit reference agencies that should let her show them to the broker so that the broker can limit the check to only lenders who are likely to accept her. It doesn't look as though the One Account will be the cheapest or fastest paid off mortgage for her because it looks as though it'll take her quite a few years to clear the mortgage, making the lowest interest rate important. Flexible mortgages or offset mortgages might be a better idea. Having that large amount of savings available should help a lot.

FreedomGirl

Monkeyman,

Glad you've got that warm fuzzy feeling No problems if you've got any more questions - just pitch in. If I'm not around, plenty of other One Account users are!

FG

Desperate_Housewife_2-2

Hi everyone,

I just wanted to post to let people know that I'm a satisfied oneaccount customer too and we are working hard to pay it off (see sig)

Its not for everone but if you are able to pay attention to your finances and work this account then its worth a look. We have both salaries paid in and I get the direct debits to go out at the end of the month (so the money stays in longer) also do stoozing so keep my stoozepot in there and keep any saving in there too.

I like the idea that it shows you are xthousands of £ overdrawn and also you see how much interest you are paying. I know the interest rate isnt the best on the planet but its better for me because I can keep interest payments low by keeping money in there as long as poss.