This One Account idea ...

[WouldBWelder]

So you have some money in your one account - wages etc every month which while they stay there are offset against your mortgage ...

What if your mortgage is £80,000 and you have £80,000 in your account? maybe best to just pay off the mortgage - but I don't understand

Is there a limit to how much you can have on the PLUS side of the account ... ?

Any useful links that explain this for a moron like me.

[pdV6]

If you have £80k in cash lying around, I'm guessing that interest-efficient mortgages aren't high in your list of priorities...

[WouldBWelder]

pdV6 said:

If you have £80k in cash lying around, I'm guessing that interest-efficient mortgages aren't high in your list of priorities...

I certainly don't have 80k lying around, I'm just posing the question if ... oh, that's a type of this account isn't it?

[victormeldrew]

Your "mortgage" isn't £80,000. Its an agreed "facility" - like an overdraft limit. You can go up to £80,000 and time you like. You are not compelled to pay in more than you take out, in which case your "mortage" stays constant or goes up. If you pay in more than you take out the balance will come down - you are repaying the mortgage. You pay interest on the outstanding balance just like any other mortgage, which obviously also increases the balance.

The danger is because its under your control you could choose not to bother repaying anything, always spend all you earn, and never repay (unless you have another investment vehicle, aka endowment, PEP, inheritance, equity in house etc etc). This is why the companies involved like them - how many have the willpower NOT to spend the money when no-one is going to stop you and you don't even have to ask?

If you genuinely want to pay off a mortage early, and you earn way in excess of what you spend, or get lump sums from time to time, or have massively irregular earning patterns (i.e self employed), then there can be benefits to these mortgages.

[oldskool]

WouldBWelder said:

What if your mortgage is £80,000 and you have £80,000 in your account?

Effectively you have a 0% mortgage

[mark387mw]

WouldBWelder said:

Is there a limit to how much you can have on the PLUS side of the account

I have a Royal Bank of Scotland mortgage which IIRC operate the One account. They didn't mind when I had funds over my mortgage balance but they still wanted my monthly payment. To them you're still paying off the mortgage.

They only allow a minimum of £1000 mortgage debit which is £7 a month payment. This is what I've done because it still allows borrowing, later on should it be necessary, to your agreed offset limit which in my case was £20k over my mortgage. It also keeps the deeds safe with the bank.

Mark

[minimax]

WouldBWelder said:

What if your mortgage is £80,000 and you have £80,000 in your account? maybe best to just pay off the mortgage

if the interest on the mortgage balance of 80k is 6.5% try finding a non-risk investment that returns 6.5% net of tax and then think about whether the mortgage should be paid off

[Nick P]

WouldBWelder said:

So you have some money in your one account - wages etc every month which while they stay there are offset against your mortgage ... What if your mortgage is £80,000 and you have £80,000 in your account? maybe best to just pay off the mortgage - but I don't understand Is there a limit to how much you can have on the PLUS side of the account ... ? Any useful links that explain this for a moron like me.

we paid off a mortgage then went into credit.....you can run it like a normal current account but the interest rate isn't as good as a conventional current account

[james p]

Nick P said:

WouldBWelder said: So you have some money in your one account - wages etc every month which while they stay there are offset against your mortgage ... What if your mortgage is £80,000 and you have £80,000 in your account? maybe best to just pay off the mortgage - but I don't understand Is there a limit to how much you can have on the PLUS side of the account ... ? Any useful links that explain this for a moron like me. we paid off a mortgage then went into credit.....you can run it like a normal current account but the interest rate isn't as good as a conventional current account

I have an offset mortgage with the Yorkshire BS. If you have more in the savings account than the mortgage you simply pay no interest but they do not pay you interest on the balance. NB you can choose whether to pay the full monthly mortgage [ie normal repayment] or base it on the net amount of the mortgage.

[Alex]

I have a One Account. There is no "plus" side; as the name implies, it is one account.

e.g. Your house is worth £200k, you have a One Account facility of £180k. At the start, your bank statement will show a balance of £180k over-drawn. You pay your salary into the account, and at the end of the month, what's left reduces the amount outstanding. Interest is calculated daily and debited from your account monthly. At any time, you can withdraw up to your facility.

That's it!

The idea is that instead of paying spare cash into a savings account and earning, say 4.5% interest, you use all your money to reduce your mortgage and SAVE interest at say 6%. Obviously interest earned is taxed, but interest saved is not!

[fido]

I used to have an offset account to faciliate my spread-betting habits.

IG Index requires you to show liquid assets, so that they can calculate a trading position limit up (i.e. how much can you afford to lose).

I told the bank adviser this when i applied for the mortgage and he didn't seem to mind - he even joked about putting a fruit machine in the reception.

Didn't make much on the spread-bets, but paid off the mortage rather quickly.

In fact i now get paid interest on the surplus at the current account rate.

So if you have 1) irregular income i.e. city bonuses 2) have spare cash lying about for DIY, gambling, etc. 3) higher-tax bracket income 4) good discipline .. offsets are a good idea!

>> Edited by fido on Thursday 19th January 14:41