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For anyone on the site who is getting to know me they will know that there are some things I love (chocolate) and some things I hate (paying interest). As mentioned on a previous opinion, I am a shopaholic and absolutely love spending money. The thing I am dead against is using credit where I have to pay interest - this to me is like setting fire to my well earned cash.
I, therefore, do not take out loans - if I can't afford it I will not buy it!! and I do not pay interest on my credit cards - I pay the balance off on a monthly basis. The only thing that remains and is a thorn in my side is my mortgage.
Unfortunately, I could not afford to buy my house outright so I had little option but to take on a mortgage and pay interest (and it hurts).
We moved to a larger house last July and really pushed the boat out with the mortgage - stretching us to above our maximum. Normally I would not have entertained this but the house was too good an opportunity to miss and we knew that we would not have to move again. So there we were back to a 25 year mortgage hanging round our necks.
I decided to take it out on the variable rate initially so that I could investigate everything that was on the market. I have now come up with this little gem - the Clydesdale Bank Rapid Repay.
This little beauty seemed to be perfect and after reading all about it I set about getting quotes from my local branch. I could hardly believe the quotation I received and actually queried it with them to ensure no mistakes had been made. I was assured that it was correct. In effect I could save over £20,000 on the overall interest and reduce my mortgage term by almost half. Yippee, I could have my mortgage paid off in about 13 years.
It sounds absolutely crazy but when you start to look at the mechanics of the mortgage it actually makes sense. It is basically set up as a current account with an overdraft limit. Into this account goes your actual current account, including switch cards, standing orders and direct debits. The mortgage itself, any personal loans and savings also go into it. So, in effect everything is working out of the same account. You are charged an interest rate of 5.24% currently (which is variable) on your debit balance and only receive credit interest if your overall account happens to be in credit (perhaps one day). You are, therefore receiving no interest on your savings (thus avoiding the tax element) but the savings element is going to reduce your mortgage balance and thus the interest payable.
As the interest is calculated on a daily basis, you are immediately benefitting when payments go into the account. You have to be extremely financially aware to operate this type of account and I would definitely not recommend it to anyone who does not have a good handle on their finances.
The secret to this account, as well as having your savings in there is to leave your salary there for as long as possible - arrange for your bills to come off as late as possible after your salary goes in and buy other items using credit cards rather than switch so the funds will stay there for an extra month. All this will help to reduce the interest being charged on the account.
An initial safety limit will be set up on the account and this will reduce on a monthly basis as if you were repaying a standard 25 year loan. Your monthly payment will be set at the outset but can obviously be amended by you at any time as long as you remain within the safety limit. Once you have had this account for a while you will actually notice that the safety limit is a lot higher than the mortgage amount (this is due to the extra funds being in the account and hence less interest being charged). You can actually withdraw the difference between the two at any time, for, perhaps home improvements, a new car or in order to have a holiday (without having to reapply to the bank for a further advance).
The total amount you can borrow initially is 90% of the value of the property and even if you do not require all this for your mortgage you can set it up anyway for any necessities (or luxuries) which may crop up. This amount will obviously be subject to your individual income and the criteria that the Bank has at the time will determine whether you can borrow the maximum amount required. The facility must be for a minimum amount of £25,001 when it is initially taken out (not a problem for me). As with all borrowing facilities you must be 18 or over to take out a mortgage.
I have already advised you of the variable interest rate of 5.24% - there is also a fee to set up the account of £200. There, are, however, no restrictions on how much you can pay into the account (unlike with fixed rates) and you can repay the whole balance at any time with no early redemption fees. They do insist that your salary is paid into the account but this should not be a hardship as that is the main benefit of the account. If you do, however, exceed the safety limit on the account you will face additional fees of £25 per month and an additional 2% interest will be charged on the amount which is over the limit.
The good thing about this as well is that Clydesdale Bank have recently launched Internet Banking on www.cbonline.com so you can now sign up for that and keep a daily check on your accounts. It is a bit of a hassle to get signed up for their Internet Banking as you must be a user of their telephone banking network first but you can phone them on 08457 240024 and get organised very quickly. Once you are registered for the Internet service it is brilliant - allowing you to view your balances and transfer funds 24 hours a day, 7 days a week. If you have to deal with a member of staff at the local branch they are always very helpful and polite. I do sometimes find that I like the human touch when doing my banking.
I do, however, realise that a lot of people reading this opinion will not be from Scotland and will therefore be unable to use the Clydesdale Bank (unless in London). Do not fear!! The Clydesdale Bank's sister company Yorkshire Bank will probably operate where you are and offer a very similar product.
I know a lot of people prefer fixed rates in uncertain times but I am certainly going to go with the flow and hopefully zap my mortgage prior to any major increases in interest rates. If it means more money for me in the long run and paying less interest it is definitely the product for me.
I definitely recommend investigation - I think you'll be surprised by the results. Perhaps it is not the best interest rate on the market but the advantages of this account far outweigh the interest rate differential.