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An old first active current account mortgage
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26-01-2016 2:03pm#1
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It's a fantastic mortgage, I haven't paid a penny in interest for years
Mind you mortgage is small now so easy to arrange it that way, you have to forgo investment interest but hey that's buttons anyway these days.
You have to find old First Active staff in a branch to get anyone who understands it, UB never had that product so haven't a clue. There are a few in HO who know how it works.
One of the main features of that mortgage is you can move it from property to property without paying it off and having to take a new one, therefore holding on to your tracker rate in the process. Now you can't increase the amount of it at the tracker rate, any extra borrowing will be at normal rates but you can move the existing amount to a new house.0 -
Hi phorminum you seem to be well able to understand this product more than me and some UB staff can you tell me that the so called facility is money that you have over paid on your mortgage but its not exsesable by you because there is no overdraft facility on this account all very confusingIt's a fantastic mortgage, I haven't paid a penny in interest for years Mind you mortgage is small now so easy to arrange it that way, you have to forgo investment interest but hey that's buttons anyway these days.
You have to find old First Active staff in a branch to get anyone who understands it, UB never had that product so haven't a clue. There are a few in HO who know how it works.
One of the main features of that mortgage is you can move it from property to property without paying it off and having to take a new one, therefore holding on to your tracker rate in the process. Now you can't increase the amount of it at the tracker rate, any extra borrowing will be at normal rates but you can move the existing amount to a new house.0 -
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Right, 2nd go.
The facility part of the account is not exactly overpayments, it may contain overpayments but is not entirely made up of them. If you never made an overpayment you would still have a facility as it is loosely speaking the difference between what you were approved for day one and what you now owe (but the facility goes down every year and does not remain equal to the difference - explained later)
The facility amount is what is available to you to re-draw down on your mortgage subject to certain conditions mainly that life cover is in place to cover the new higher outstanding amount if you draw down the facility.
It can't be used to dip in and out of like an overdraft, you have to formally request in writing any draw down of it so you wouldn't be doing it for the odd few hundred or so.
Now for an example of how to use a facility-
Let's say your original mortgage was 150k over 20yrs with 100k now left outstanding, so you are some number of years into the mortgage. The facility showing will not be the full difference of 50k between what you owe and what you originally borrowed but will probably be around 35kish (just guesstimate). So you decide you want to build an extension and need the 35k in your available facility so you apply to draw it down, it is transferred into the current account and you withdraw it, the balance outstanding on your mortgage then goes from 100k to 135k and your facility resets to zero. Now obviously as you now must pay back 135k within the same timeframe as the original mortgage your monthly payments go up. What's the benefit of getting the money you need this way rather than other borrowings? Well mainly the interest rate which will still be the current account mortgage tracker rate of 1.15% over ECB. No other borrowing will be that cheap plus there is no real application process. Over time the facility will appear again but will be lower, it goes down each year as if it were to remain the same as the difference between what you were approved for day one and what you owe then you could have the situation where in year 19 of a 20yr mortgage you could top back up to the original amount, this would make no sense as obviously repayments on that big an amount would be too much over one year. So the facility amount available increases initially as you repay the mortgage but then decreases as the term shortens.
Another example of how the facility could be used would be for say to buy a car. Let's say you want to buy a car for 10k and you want to borrow the 10k. You can draw down 10k from the facility and buy your car. Now most people would say that is madness increasing your mortgage to buy a car and it would be if you intended repaying it over the remaining term of the loan by which time the car is probably a distant memory. So say you borrow the money from the bank/credit union on a 5yr car loan at a rate of ???? I don't know what rate you will get but it will be a lot higher than the current account mortgage rate of 1.15 over ECB. What you should do is draw down the 10k from the facility and then overpay the mortgage each month by what the repayments would be on 10k at mortgage rate over 5yrs. This will bring you back to the same position in the mortgage as you would have been had you not drawn down the extra but you will have had the benefit of paying for your car loan at the low mortgage rate.
The other big benefit to this mortgage is the offsetting arrangements, any balance in any account that you have linked to the offset mortgage will be taken into account every day when interest is calculated on the mortgage.
For example lets say your salary of 2k is paid into the account on the 5th of Feb, then that night interest on the mortgage is calculated on the balance amount less 2k, as you spend the 2k over the next month the balance left in the account every day saves you interest on the mortgage that day. So for every euro you have in an offset account you are saving interest on a euro of your mortgage. It's not unknown for people who are really working this mortgage to pay for everything every month with credit card and clear that at end of month to maximise the resting balance in their offset account to save interest charged 1 -
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Will do it again later when I get a chance. 
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