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Mortgage/bank accounts question

steve m - 13/8/13 at 05:57 PM

Hi all

I have been looking at changing my current account, from HS BC to a Building society as all of the accounts I currently hold, do not get any interest, and no chance of any !! ive tried!

As ive got older (wiser) I seem to have money left in my accounts at the end of the month, and have always thought , why can i not use this to help pay off my mortgage (I am aware of accounts that do this, but never trusted them)

My Wifes accounts, and mortgage are with the same building society already, and if I was to transfer my accounts over to the same, would it make much of a difference ?

Am I missing anything ?

Steve

mookaloid - 13/8/13 at 06:32 PM

check that your mortgage allows you to make additional payments but as long as it does then just send the money - it's a good idea

Don't see why you would need to move your bank account to do it.

ReMan - 13/8/13 at 06:38 PM

No interest to be had in a BS account, not at least a working one.
Just set up payment and at the end of each month make it into your mortgage account. Theres very few that wont let you, but you may need to get the exact account details from your mortgager to set it up correctly.
Never a better time imho if you can afford to

daniel mason - 13/8/13 at 07:01 PM

do the Ł250 per month regular saver from hsbc! rates are good but you can only put in Ł250 a month and after a year it goes straight into the current account then start again. obviously its not wise if you have shed loads of money sat in an account but as a mortgage booster its a good idea.

Worzey - 13/8/13 at 07:20 PM

I've got a mortgage linked to my savings accounts and don't really see a downside.

I've got instant access to my savings if I need it and I'm currently saving interest at 3.29% (tax free) while simultaneously taking years off my mortgage.

This is much better than any savings rate you'll get and the switch to the new account was almost painless.

daviep - 13/8/13 at 08:37 PM

I'm sure you have looked at offset mortgages, like worzey I can't see a down side, it's very satisfying to see the amount of interest dropping every month as you deposit savings. It's very very satisfying when you have enough savings that you aren't paying any interest Plus you have the bonus that you still have instant acces to your savings.

If you haven't done any research yet then check out First Direct, Yorkshire Building Society and also Scottish Widows.

Cheers
Davie

steve m - 13/8/13 at 09:02 PM

Thanks Guys

Got some thinking to do !!

Dave (worzey) I might pop over at some point,

steve

Worzey - 14/8/13 at 07:36 AM

You're more than welcome Steve. Drop me a DM and we can get something arranged.

swanny - 14/8/13 at 07:46 AM

other than having access to some of your money is there another advantage to the offset idea over and above putting all your savings into the mortgage? (barring a feew grand as a rainy day fund) the interest you are being charged on the mortgage is probably higher than even fixed term bonds etc. depends how much cash you have and the size of the mortgage i suppose.

mcerd1 - 14/8/13 at 08:06 AM

quote:
Originally posted by swanny
....depends how much cash you have and the size of the mortgage i suppose.

you said it

you just need to do the maths for each deal and see which one suits you best....

I'm sort of stuck with my mortgage at the moment (well there is no way I'm going to find a much lower rate), but mine allows any size overpayment you like and payment holidays up to the value of the overpayments you've made - all without any fees - so in my eyes that can work out not much different from an offset mortgage if you need it but hopefully saves me even more...

even just putting an extra Ł500 in near the beginning of the mortgage knocked a good year off the payments

(I can also ask them to keep the term the same and drop the payments, but thats obviously going to cost more in the long run...)

[Edited on 14/8/2013 by mcerd1]

Worzey - 14/8/13 at 08:13 AM

The advantage of a One Account is that it's linked with my current account as well as the savings accounts. At the start of the month before my regular payments go out I'm saving a fair bit on my mortgage. As the month ticks by this obviously decreases as the funds leave the account but every little helps. This alone can save years on the mortgage.

Slimy38 - 14/8/13 at 08:16 AM

I had an offset mortgage (Intelligent Finance), made virtually no difference despite regularly having five figures in the current account. We switched to one that allowed overpayments, and from memory I believe we'll be paid off at least ten years early by only paying an extra couple of hundred per month.

Overpayments make the most difference early on in the mortgage, if you look at the first few payments of a mortgage the bulk of the money goes on interest. As time goes on you pay more off the mortgage and less on interest. If you can get to that stage quickly you can save ridiculous amounts on a mortgage.

[Edited on 14/8/13 by Slimy38]

mcerd1 - 14/8/13 at 08:38 AM

^^ I did a little spreadsheet for my mortgage (compound interest is a right pain to do by hand)

I worked out that just an extra Ł50/month from day 1 would pay it off ~6 years early and saved me ~Ł3200 in interest payments

but the general rule of thumb is always deal with the highest interest rate first - so say a credit card at 19.5% then a loan at say 8%, then a mortgage at say 4% to 5%, then your savings at 1.5% to 3%....
if you do them in that order you won't go far wrong (unless there is some penalty for paying them early etc...)

[Edited on 14/8/2013 by mcerd1]

daviep - 14/8/13 at 12:04 PM

^^^^ good advice with regard to order of payment, you can take it a step further and use lower rate debt to pay any higher rate debts. If you have time on your hands and are organised and disciplined then you may be able to benefit from "stoozing". I am a stoozer and have managed to get my mortgage interest down to zero saving me approx. Ł50k in interest and 20 years on my mortgage.

Google "stoozing"

Cheers
Davie

mcerd1 - 14/8/13 at 12:21 PM

quote:
Originally posted by daviep
...If you have time on your hands and are organised and disciplined...

^^thats the key - if you make a small slip up out could lose out on a lot of hard work
(too much work for me, but my accountant mate has done very well out of it)

[Edited on 14/8/2013 by mcerd1]

cliftyhanger - 14/8/13 at 12:35 PM

We are in teh fortuanate position to have taken out a base rate tracker mortgage about 12 years ago, and it is offset.
the rate we pay is 1 1/4%, (I hadn't realised this until I actually checked properly 6 months ago) so we are doing some regular savings type things that outperform teh mortgage. ie teh mortgage is actually making us money. sadly in our house move we cannot keep it as interest only, so have been stuck on a repayment mortgage. Downside is we are actually having to pay some ack each month.

The huge issue with offset mortgages is lack of self-discipline. A huge proportion of punters would be sorely tempted to spend the "savings" they have accrued. If you can handle that side, there is no downside. At worst they are no better than a normal mortgage. But huge savings are on the cards......

daviep - 14/8/13 at 02:30 PM

quote:
Originally posted by cliftyhanger
We are in teh fortuanate position to have taken out a base rate tracker mortgage about 12 years ago, and it is offset.
the rate we pay is 1 1/4%, (I hadn't realised this until I actually checked properly 6 months ago) so we are doing some regular savings type things that outperform teh mortgage. ie teh mortgage is actually making us money. sadly in our house move we cannot keep it as interest only, so have been stuck on a repayment mortgage. Downside is we are actually having to pay some ack each month.