Paying off that mortgage

Just a warning: I’m now going into sales-pitch mode. I do not work for the One Account but I think it’s brilliant (well, brilliant for me, I take no responsibility if you listen to me and end up huge great hole of debt). Having said that, I could get some money if you sign up and say I recommended you but that’s not the point of this post. Really it isn’t. That *would* be nice though…

The One Account is one of those ‘offset everything you own against your mortgage’ type accounts. This means that you merge your mortgage, savings and current accounts in a single pot so any money you have is constantly offset against your mortgage. This means the actual amount of money you’re borrowing at any one time is less that it otherwise would be and hence you pay less in interest. Ok… sounds interesting but what does that actually mean? Well, it gives you a variety of options but the most important one for me is that you can pay of your mortgage in a much shorter time period.

We signed up for the One Account at the beginning of this year and set the ambitious aim of paying our (not insignificant) mortgage off in 4 years instead of the usual 20-25. What?! 4 years? Are you freakin’ crazy I hear you say? [Well you might not be saying that but it makes this post far more interesting for me if I imagine you are so I’ll pretend.] We didn’t pluck the 4 year figure out of thin air; the One Account website has a handy Mortgage Shrinker you can use as a guide. The following graph gives you an idea how this works:

As you can see, salary comes in every now and then which reduces how me we owe to the bank and then this amount slowly increases as we spend money before the next salary payment. More importantly, the amount it increases to each time is lower than the previous amount, i.e. the mortgage is getting smaller.

So half a year in, how’s it looking? Pretty darn good actually. Amazingly, that ability to offset your salary payments against your mortgage until you spend them, plus the ability to effectively pay off bits of your mortgage constantly has left us in pretty good shape. We are entirely on track to pay the thing off in 4 years, if not sooner.

P.S. Worth noting that just because you can pay off loads of your mortgage quickly, doesn’t mean you can’t spend it too. Effectively you could end up only having paid off interest after 20 years and no capital, or pay off £20k and then blow it on a new car or something. Only a good idea if you have some self-control over your finances!

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12 thoughts on “Paying off that mortgage

  1. Nice idea! We do a similar thing, but manually offsetting our savings against our mortgage so effectively our savings ear the interest charged by our mortgage so we’re able to concentrate on paying it off. It’s much more manual doing it that way though, these properly off-set mortgages are a great idea if you can get one at a decent rate!

  2. Nice idea! We do a similar thing, but manually offsetting our savings against our mortgage so effectively our savings ear the interest charged by our mortgage so we're able to concentrate on paying it off. It's much more manual doing it that way though, these properly off-set mortgages are a great idea if you can get one at a decent rate!

  3. If you compare the rate of the One Account to a standard mortgage it’s gonna be a lot higher. However, if you have the ability to pay it off in 4 years as opposed to 20 then that higher interest rate is a lot less significant.

  4. Correct. If you’re prepared to do it manually, however, you benefit from a lower mortgage interest rate and a higher savings rate. Overpay on your mortgage each month, saving the remainder. Once the amount of savings you accrue is equal to the remaining balance pay the balance off in full. I’d be interested to do a Braines-style spreadsheet to work out which approach is more beneficial. I suspect it would depend on just how quickly you’re capable of paying off the balance though, I would expect there to be a cross-over at some point as to which is most efficient.

  5. If you compare the rate of the One Account to a standard mortgage it's gonna be a lot higher. However, if you have the ability to pay it off in 4 years as opposed to 20 then that higher interest rate is a lot less significant.

  6. Correct. If you're prepared to do it manually, however, you benefit from a lower mortgage interest rate and a higher savings rate. Overpay on your mortgage each month, saving the remainder. Once the amount of savings you accrue is equal to the remaining balance pay the balance off in full. I'd be interested to do a Braines-style spreadsheet to work out which approach is more beneficial. I suspect it would depend on just how quickly you're capable of paying off the balance though, I would expect there to be a cross-over at some point as to which is most efficient.

  7. Once the amount of savings you accrue is equal to the remaining balance pay the balance off in full. I'd be interested to do a Braines-style spreadsheet to work out which approach is more beneficialgood one

  8. Once the amount of savings you accrue is equal to the remaining balance pay the balance off in full. I'd be interested to do a Braines-style spreadsheet to work out which approach is more beneficialgood one

  9. ust a warning: I’m now going into sales-pitch mode. I do not work for the One Account but I think it’s brilliant (well, brilliant for me, I take no responsibility if you listen to me and end up huge great hole of debt). ———————————– nice heads up dude!

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