How does it work?

carl310166

I am thinking about getting the "one account" mortgage in the future.

How do you actually overpay every month so that the term is dramatically reduced?

I would have a surplus of about £1300 every month,and would like to pay this amount off the capital except when going on holiday and christmas etc.

So,would the mortgage reduce by that amount,plus the standard mortgage payment?

Or,would the £1300 go into a "savings account" and offset the interest?

If the latter was the case,how does this pay down the mortgage asap?

Or do you manually have to pay lump sums off the capital?

Thanks in advance

Joe_Bloggs

Your savings in accounts can offset the capital borrowed. Thus you will be charged less interest per month. Your minimum monthly repayments will remain the same but more of your monthly payment goes towards paying off the capital borrowed. You can choose to commit part of your savings/overpayment directly to paying off capital. This reduces the capital owed on your mortgage but you don't gain or lose anything by doing this as this money would have offset capital if it was left in the savings/current accounts. In many cases you can borrow back what you overpaid.
The only drawback is the interest rate with these schemes. You have to work out what return you could get with your money if you had an alternative seperate mortgage and savings schemes. Taxation circumstances and likely cash movement through these savings accounts aswell as ability to make overpayments are features that need be assessed.
J_B. (You could stooze money in an offset account also.)

carl310166

I did have stoozing in mind also,BUT i wanted to reduce to term from say 17 years to say 5.

So could i build up a savings pot for a year (offsetting the interest) then pay a lump sum off?

Joe_Bloggs

I don't claim to be an expert in the overpayment section of the First Direct terms and conditions. I did apply for First Direct but went with Intelligent Finance. You do not gain anything by paying off your mortgage capital with linked money allready in your First direct accounts. You just lose the flexibility to do something else with it. I chose to make occasional overpayments just to make the capital owed a round figure. This was coupled with approx £14K of stooze. I have had to de-stooze to remortgage with Nationwide.
There is so much glamorous advertising twaddle with these deals that does not make much financial sense, on reflection. There may be circumstances where these deals make sense to high rate tax payers who have no savings alternatives. Or those with accumulating funds for regular bills that have to be paid in the future. Mix the two together and you may have a winner.
J_B.