Noob asking for advice

THXbob

Hi

This is my first post and of course I'm asking for some advice.

The wife and myself would like some help on how to start working on paying off the mortgage (repaymentas soon as possible.

We owe £38,000 at the moment with the One Account and the planned repayment date is another 18 years and 8 months. At present we pay £296 pcm with an interest rate of 6.34% until 29.08.2008 and then 6.80%.

At the moment we could pay an extra £350 extra per month.

Whats the best way to tackle this?

I'm totally money/finance illiterate so I'll try and answer any questions to the best of my simple ability.

Thanks and have a good weekend.

Bob

Kaz2904

With the one account you need to keep your money in there for as long as possible until it goes out. So you need to set up DD's for the day before payday.
You could try to utilise things such as cash back credit cards or 0% on purchases for x months cards. That way your pot of money is sitting in the bank saving you money on your mortgage.
As you could more than double your mortgage you would be able to more than half it by making the overpayments.
If you go to www.whatsthecost.co.uk and type in your basic figures to the snowball calculator then you will get a mortgage free date of October 2013 if you start now.

jamesd

Checking with the Egg mortgage calculator for modern daily interest mortgages I see that on a repayment mortgage for 38,000 borrowed with 19 years to go at 6.8% the monthly payment is 297.31 and the total to pay is 67,786.36.

Add on the 350 extra a month to get a monthly payment of 647.31 the term falls to 6 years and the total to pay drops to 46,332.48.

Looks fine for the One Account so far, until we look at the competition. Hinkley & Rugby Building Society do a no setup fees (no lender, valuation, admin, HLC; 145 redemption fee, free legals for remortgages) offset mortgage at 6.34%.

For a 19 year repayment term on 38,000 borrowed at 6.34% that starts out at 287.12 monthly payment and 65,464.03 total to pay. Increase the monthly payment to the same 647.31 as the One Account with your overpayment, 360.19 overpayment on this cheaper mortgage. The term falls to 5 years 11 months and the total to pay drops to 45,610.47.

So using the same interest rate all the time the One Account takes one month longer and costs 722.01 more. The One Account matches the rate of the H&R BS for a year and that saves about 171 on the One Account amount, leaving it about 551 more expensive.

Both let you overpay whatever you like whenever you like and draw down the money once you've built up an excess (in the offset account for the offset mortgage).

If you like the One Account an extra 100 a year to use it doesn't seem like too bad a deal.

If you want to save more you'd need to look at a less flexible alternative or one with a setup fee, that might not be recovered in savings on your fairly low mortgage value.