One Account - Question

Capricorn_One

I've got an offset mortgage with the Newcastle. I haven't actually been offsetting, just making overpayments but it's .5% + BOE so it's ok.
All the calculators confirm that if I maintain my overpayments I'll be mortgage free in 3-4yrs.

I just looked at the OneAccount Mortgage Shrinker web site and the bit where it says:
"What savings would you pay into the One Account?" also says "...reduces your mortgage balance and shrinks the interest you pay... Of course, you still have immediate access to your savings".

Well, that bit I find interesting because if I put £20500 in there it brings the term to 2yrs 4months. This is NOT offsetting, it's an overpayment and yet they're saying I can have access to the savings.

If what they're saying is true. I'd be better off re-mortgaging to them even at their terrible interest rate.

I thought the One Account was just a flashy offset CAM?

Thanks, Ed.

minimoocow

Hi Capricorn One!

I have a one account and it can work well but I think the rate is much higher than what you are currently on.

The morgage shrinker works on basis that if you pay the savings in you don't take them out - hence giving you an earlier repayment date than you would otherwise have.

So it is like a offset however the offset is only virtual because it is held in "one account" rather than a true offset which will have several different linked accounts. But you do have access to your savings as you can withdraw any overpayments at any time (provided you are still within your limit)

Hope that helps!

MMC

nrsql

Can't you do the same thing with your current offset mortgage and bring the term down even more?
Why aren't you using the offset facility?

getmore4less

One of the benifits of any offset arrangement is the immediate access to the money so overpaying rather than offseting removes this benifit for NO additional gain.

Stick your overpayments in the offset account(s) and when they equal the mortgage you have in effect paid it off(and can if you want) and can just let it run paying no interest and sill have access to the money should you need it.

You have a good rate I would stick with it.

Capricorn_One

nrsql wrote: »

Can't you do the same thing with your current offset mortgage and bring the term down even more?
Why aren't you using the offset facility?

Good question. I've not used it because I wanted to overpay instead. I just want to be able to clear the mortgage as soon as possible. Maybe I made a mistake with the maths but looking at the Egg calculator, overpaying clears the mortgage quicker than offsetting.

The £20500 I have is in an ISA and the Newcastle mortgage doesn't allow offsetting ISAs.

Now I've used my ISA for this year, any spare savings will certainly go in the offset a/c.

nrsql

If it's a proper offset then putting money in the offset account should be the same as overpaying except that you can access the money - it could even be a bit better depending on how quickly they apply the overpayment. Think there is maybe something wrong with the egg calculator.

The only difference with the one account will be the extra interest so it will take longer to pay off the mortgage.

Capricorn_One

I don't think I have my head around the offset thing at all.
I knew that you were only charged interest on the difference but I didn't know it was virtually the same as overpaying in terms of reducing the term of the mortgage.

nrsql

Where did you think the interest comes from when you overpay? It's calculated on tyhe outstanding amount which is the same whether you overpay or put the money in the offset account. In both cases you stop getting interest when the mortgage is paid off or fully offset.
The only difference with the offset account is that you can get the money out again without having to remortgage - means you can use it for short term money.

jamesd

Capricorn One, worth noting that the One Account calculator considers your mortgage to be paid off the moment the "offset" money is enough to fully cover the mortgage balance. That means that it'll show there as cleared much sooner than for an offset calculation that only uses the funds to reduce interest, not pay off capital.

The interest rate doesn't lie: the One Account is more expensive than other current account or offset deals with lower interest rates. Unless you're paying in and taking out a large part of the mortgage balance each month - if the cycle is longer than within the month an offset account can handle it easily. Even within the month last time I checked there were cheaper current account mortgages available.

If you offset 10,000 that means that you're not paying interest on the 10,000. That in turn means that if your monthly payments stay the same more of them are going to pay off capital, just as is the case if you'd taken the 10,000 off the capital. The difference is just that you can take the 10,000 back out whenever you like without having to ask the lender. The only difference comes at the end of the mortgage when there's less than 10,000 to pay and the offset money stays in the offset account while all of the monthly payments are off capital until the capital is fully repaid.