andyr

We are thinking of moving our mortgage account from a standard capital and interest to one of the offset accounts : I think most lenders offer these : some have their own names : Virgin have the "One" account. All seem to work on the principal of you putting your salary, and savings into the account and also operate your mortgage from it as well. Interest is then calculated on the overall amount you owe so, instead of the usual way whereby your mortage calculated on , say the £80,000 outstanding and you then get a tiny amount of interest on your savings in a seperate account and any money in your seperate current account, the mortage rate is calculated on (80,000 - savings - salary ) and for us this appears to work out at a much better deal.
Has anyone looked at these before and if so what is your opinion ?

3times

There are various types of these accounts, some like the Virgin One which is essentially a current account with a massive (mortgage amount) overdraft facility so you only get charged interest on the amount outstanding at the end of each day. the other type ie Woolwich is an Offset account, this works by having various accounts ie mortgage, savings, credit card, current. The accounts are totalled at the end of each day and you again only pay interest on the amount owed. You do not recieve any interest on your savings as any accounts in credit are used to offset the accounts in debit, however this can been seen as recieving net interest on accounts in credit at the same rate as the mortgage.

These type of accounts can, if used properly reduce the term/ amount owed on the mortgage quite significantly BUT if you are not very disciplined financially they can get you in trouble as in most cases the lender will give you a credit over and above your outstanding mortgage (earnings and loan to value assuming). This means that you could have a cheque with the possibility of a facility to go and buy a nice piece of exotic machinery, and then you have to pay for it.

I hope this helps.

andyr

Thanks for that : I'm going to read all the small print but we've looked into the offset account in reasonable depth and overall we woudl be saving a fair bit each month.