Yes, I know financial stuff is boring, to me as well as you, but if you can bear to put aside your preconceptions and read this, you may well be very glad of it.
In the old days, the banks held all the cards in their hands; if they lent us money they did it at one interest rate, if they took our money on deposit, then they paid a much lower rate or none at all. So basically, their money was worth more than our money. Pretty unfair, eh?
Nowadays, a whole new range of mortgages has come onto the market, which go some way to levelling the playing field, and ensuring that the consumer gets a fair share of the value of his/her money. Having invested some time in researching this, the best of these, in my opinion, is the Offset Mortgage offered by First Direct and this is the one my partner and I have remortgaged our home with.
The basic principal of the Offset Mortgage (it used to be called “Smart Mortgage”) is that all your borrowing and lending is brought together at the same interest rate. So, if you have a mortgage of £50k and savings of £10k, you will only pay interest on the outstanding sum of £40K: i.e. the mortgage sum gets broken down into one single figure of how much you owe (i.e. mortgage, loan, credit card), minus everything you have in credit (savings, current a/c).
This means that the credit interest on your accounts, instead of sitting in their respective accounts and becoming subjected to tax, becomes diverted into the mortgage pot, thus reducing the loan and effectively becoming tax-free interest. You can still get your hands on it at any time, should you want to though, as the mortgage is very flexible.
The interest you pay is calculated daily, so as soon as you pay your salary in, you are immediately reducing your mortgage interest. This can have a big impact over time in shortening the length of your mortgage. You are allowed to make overpayments, underpayments, and take payment holidays and if you should be in the fortunate position of being able to pay off the mortgage completely, there is no redemption fee.
Currently the interest rate is 4.5%. Not only is this cheaper than the comparable mortgages offered by Virgin Direct or Intelligent Finance but First Direct also guarantees that this rate will not rise more than 1% over the Bank of England base rate. This compares with no such guarantee from Virgin Direct, and a not-above 2% over the base rate assurance from IntelligentFinance.
There is a one-off arrangement fee of £245 to set up your offset Mortgage, and if you are remortgaging a property worth less than £250k, then the valuation is free. For properties valued at over £250k, the arrangement fee is waived, but you have to pay for your own valuation.
First Direct have very good mortgage calculators on their web-site, so its worth spending five minutes seeing if you could save yourself some money: http://www.firstdirect.com/offsetmortgage/offset_mortgage.shtml. They also have loads of information there in case I have omitted to mention anything.
Thanks for reading to the end of this "boring financial opinion". I think this is an outstanding product, the best in its class, and that is why I'd like to spread the word and save other Ciao readers some money!
How helpful would this review be to a person making a buying decision? Rating guidelines
I might give these a call, I'm looking into mortgages as i wanna get my own place but don't really want to rent anywhere! Thanks for that review! Lou.x
purplelynne 21.01.2005 18:21
My friend uses them and swears by them. She says the phone staff are so friendly. Lynne x
Vodkaboy 11.11.2003 16:29
Hi, really helpful as i am looking at mortgages and had thought about First Direct. They are great as a bank, excellent service and if things do go wrong, they put it right. Think I will have another look at their mortgages, ta!
Oct 16th, 2003
very helpful by (89%):
helpful by (11%):
