Virgin One account interest tips

Going_Digital

Tip 1

Well it seems that owners of the Virgin one account are in for a bumpy ride as RBS have decided to help themselves to your money by increasing the interest rate by.5% in recent months despite no increases in the base rate.

Now obviously this is going to cost you a lot more in interest charges and if you can find a better deal elsewhere then that would be the best solution. The trouble is many people won't switch because either it is to much trouble to move or because it is hard to find good deals out there in the current climate.

Remember that your interest rate is based on the size of your facility not the amount you originally borrowed. If for example you originally borrowed £180,000 for a £200,000 home you would have had a facility of 90% of the value of your home. But if you have repaid £30,000 over the last few years and your balance now stands at £150,000 your loan amount is only 75% of the value of your property. This means you could potentially reduce your interest rate by .35% simply by making a phone call to the One account.

Here are the current interest rates based on the size of your facility....

up to 50% - 6.60%
50.01-75% - 6.70%
75.01-80% - 6.80%
80.01-85% - 6.90%
85.01-90% - 7.05%
90.01-95% - 7.20%
95.01-99% - 7.45%

Now using the example above where your original loan was £180,000 of your £200,000 house means your loan would represent 80% of the value of your house and would be on the 7.05% interest rate. But even though you may have reduced your balance to £150,000 now you are still paying interest at 7.05% because you still have the facility to borrow up to £180,000 at any time.

Do you really need this extra facility ? because you can reduce it and reduce your interest rate. If for example you reduce your your facility size all the way down to £150,000 in the example you would then have a facility of 75% making the interest rate 6.7%.

Now you may be holding on to the extra facility in case you have a sudden bill that needs paying for example you need a new boiler because yours breaks down. But if you carefully asses how much extra facility you may need then adjust down as necessary. For example you could reduce the facility by £20,000 to £160,000 still leaving you £10,000 unused facility in the case of an emergency and this would lower your facility percentage to 80% and put you on the 6.9% rate. Still a healthy .15% reduction in interest.

Going_Digital

Tip 2

If you have had the One account for a number of years it may be worth applying to have your house re-valued. Chances are that if you have had your One account for at least 8 years and have never applied to have the house revalued that you are paying well over the odds for your interest charges.

If for example you borrowed £90,000 for a £100,000 valued house you would be on the 90% rate of 7.05% assuming you haven't already reduced your facility as described in Tip 1.

Despite recent falls in house prices your home is likely to be worth considerably more than it was when you took out the mortgage, especially if you have made improvements such as installing a new kitchen or bathroom. It would not be unreasonable to expect a house bought 8 years ago for £100,000 to now be valued at £200,000. Having had the property re-valued your facility will be calculated as a percentage of the current value meaning that your £80,000 facility would fall into the less than 50% category dropping the interest rate all the way down to 6.6% a cut of .45%.

There is a charge for having the house re-valued so you should ask RBS for the full costs before going ahead. But in most cases it is worth it as although the savings in the first year will probably be eaten up by the cost of the valuation survey it means you will be saving year after year from now on.

I believe valuation is currently under £200.

wymondham

As I understand it you could reduce your facility to get the better rate, then if you do get that unexpected bill you can call them to raise it again......

Going_Digital

Tip 3

Don't forget that the one account is an offsetting mortgage that means that any money you have in the account reduces the interest charges. try and keep as much money in the account as possible at all times. So some small things you can do are...

If you have money in another account somewhere you will probably be better off moving it into the one account to save some interest charges.

Use the visa card to pay for things rather than the maestro as the visa payments are taken in batches rather than immediately taken from the account.

Try and organize bills so they are paid as late as possible after your salary is paid into the account.

If you are really struggling then probably time to go lean and try and shave a few £'s off of your weekly costs as just a few £'s will soon mount up to reduce interest charges.

Going_Digital

wymondham wrote: »

As I understand it you could reduce your facility to get the better rate, then if you do get that unexpected bill you can call them to raise it again......

You can increase the facility again yes, but you have to apply for it and they don't have to approve the increase. So probably better to be on the safe side and not cut the facility to far in case they don't authorize an increase.

Desperate_Housewife_2-2

Try and get as much 'free' money as you can in there by

- stoozing and leaving stoozepot in there (even BT fee at 2.5-3% is better than 6.6-7.45%)

- Make sure all your direct debits leave the account at the latest possible date.

- Use a cashback credit card but ALWAYS pay off the balance when the bill comes for this tip to work. This will ensure that the money you have already spent stays in your account for longer. The V1 visa only give you 1 week whereas you get around a month of 'free' money using a different credit card.

- keep all your savings in there too (if you have any)

Going_Digital

In case anyone is unsure the way to work out your percentages is ...


Take the size of your facility and divide it by the value of your house.

For example your facility of £180,000 is divided by the value of your house £200,000. So 180000/200000 = .9 or in other words 90%.

So to figure out what the next lowest facility would need to be to benifit from the next lower band simply do the following calculation. Take the value of the house and multiply by the facility percentage. So for example if you want to move down from 90% to 85% simply multiply £200,000 by .85 so £200000*0.85 = 1700000 so to benefit from the 85% band you would need to reduce your facility to £170,000 in this example.

2ndBounce

Useful tips - I'm considering this mortgage option. On their mortgage interest rate page,
they quote their 'typical rate' at 6.7% (adjusted overall) but this corresponds to a borrowing no more than 75% of the home value. Do most One Account customers have sizeable capital?

nrsql

Probably a better tip is to not take out a one account mortgage or move away if you can. It's unlikely to save you money.

Going_Digital

2ndBounce wrote: »

Useful tips - I'm considering this mortgage option. On their mortgage interest rate page,
they quote their 'typical rate' at 6.7% (adjusted overall) but this corresponds to a borrowing no more than 75% of the home value. Do most One Account customers have sizeable capital?

I'm afraid I couldn't recommend the one account to anyone, the tips are really aimed at people who have one already and are not willing/able to find another deal elsewhere. My advise would be look elsewhere if you are starting a new mortgage as the RBS are not trustworthy and could well increase rates further over coming months if they feel the need for some more money to prop themselves up with.

wymondham

nrsql wrote: »

Probably a better tip is to not take out a one account mortgage or move away if you can. It's unlikely to save you money.

Impossible to say this without any details from the poster.... If used correctly and for it's purpose the One Account can work very well ... I cleared my mortgage in 9 months flat. There are lots of posts on this account detailing pro's/con's - mainly in the mortgage free wannabe board - have a read.