Current Account mortgages

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WhatsGoingOn

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Hi,

Are there any drawbacks to current account mortgages?
Myself and my girlfriend have a mortgage of 250,000 with PTSB and have €40k cash in the bank. Between us we can save about €20k a year. We are thinking of remortgaging with someone like First Active and getting a Current Accout Mortgage so this money could be offset against our mortgage repayments, thus reducing our mortgage term (33 years left on mortgage).

Is this a wise option, or would we be better investing the money elsewhere?

Thanks for your help.
 
First Active's CAM is a great type of mortgage, particularly for people like yourselves i.e inclined to save. Have you tried the calculator on FAs website to see how much you could actually save? I think you would find it difficult to get this level of return from an investment. You also have access to your funds at all times so your money's not tied up like perhaps it would be if you were to invest it

The only drawback I can think of is that you can't choose a fixed rate. In saying that though the interest rate is around .25% below FAs standard variable rate. It is currently 3.78% I think (could be 3.79% though?) and is guaranteed not to exceed the ECB by 1.5%.

Also, if you are switching you will have to pay your own solicitor. You can use First American's Quickswitch though for an all inclusive fee of €999 inc VAT, this would also be quicker than a regular solicitor.
 
WhatsGoingOn said:
Hi,

Are there any drawbacks to current account mortgages?
Myself and my girlfriend have a mortgage of 250,000 with PTSB and have €40k cash in the bank. Between us we can save about €20k a year.
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If you have 40k liquid at a time its a good idea in my opinion. If you only have 3 or 4k its of dubious benefit . A mate has one because he buys and sells antiques when he sp[ots a good deal, he can have from 20k to 60k cash lying around looking for a deal at times .

First Active are busy trying to boot their customers off with bull**** so try NIB instead maybe.

Calculate full annual outturn against a tracker and against tracker+ high interest demand or 1 month demand account like the Rabo one to see which is best.
 
Thanks for the replies all.
I had read the other topic too, thanks. I'm in a position where I want to reduce my term, rather than my monthly repayments, so I don't think it applies to me.
I'll check NIB too, but a friend of mine switched to First Active recently and they paid all his solicitor fees, so I'm not sure if NIB do that too.
 
If you want to reduce your term there are other ways of doing so-you can either make a lump sum payment now, or overpay every month (if your lender allows).
 
CCOVICH said:
If you want to reduce your term there are other ways of doing so-you can either make a lump sum payment now, or overpay every month (if your lender allows).
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Thanks CCOVICH, but according to First Actve, if we take out a mortgage of 260,000 with them over 33 years and we continue our current savings, the term would be reduced by 26 years and 6 months, saving EUR 168,740.18 in interest. I doubt any other type of mortgage could match that (other than maybe NIB's CAM)
 
that sounds ridiculously low mate :p

Here is the NIB explanation of their product , I thought the FA one was the same more or less .

[broken link removed]

How it works
Instead of earning interest on your savings, you pay less interest on your mortgage. For example, if you have a home loan balance of €70,000 (Debit), an average current account daily balance of €1,000 (Credit) and a savings account balance of €7,000 (Credit), you pay interest on only €62,000 instead of €70,000.
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The other advantages are

1. No Dirt tax on savings .
2. The interest on the €40k savings is straight offset so a fairly typical mortgage rate is 3.5% nowadays which is high for a deposit account nowadays BEFORE Dirt which is of course not applicable as FAR AS I KNOW
3. High interest savings deals like the Anglos Irish 4% odd will be 3% after Dirt tax and the high rate ones are generally not on instant access. NIB will chuck your money out faster to you but you lose any benefit from it in that month.

Ask NIB how they "treat Dirt" and if its offset straight its a good deal , if they say they have to deduct Dirt before the offset its far more complex .
 
WhatsGoingOn said:
Thanks CCOVICH, but according to First Actve, if we take out a mortgage of 260,000 with them over 33 years and we continue our current savings, the term would be reduced by 26 years and 6 months, saving EUR 168,740.18 in interest. I doubt any other type of mortgage could match that (other than maybe NIB's CAM)
Click to expand...

If you use the mortgage calculator on Karl Jeacle's site you can play around with the figures.
 
CCOVICH said:
If you use the mortgage calculator on Karl Jeacle's site you can play around with the figures.
Click to expand...

Karls cannot handle offsets , only lump sums thrown in in month x to reduce the balance.
 
2Pack said:
that sounds ridiculously low mate :p

Here is the NIB explanation of their product , I thought the FA one was the same more or less .

[broken link removed]


The other advantages are

1. No Dirt tax on savings .
2. The interest on the €40k savings is straight offset so a fairly typical mortgage rate is 3.5% nowadays which is high for a deposit account nowadays BEFORE Dirt which is of course not applicable as FAR AS I KNOW
3. High interest savings deals like the Anglos Irish 4% odd will be 3% after Dirt tax and the high rate ones are generally not on instant access. NIB will chuck your money out faster to you but you lose any benefit from it in that month.

Ask NIB how they "treat Dirt" and if its offset straight its a good deal , if they say they have to deduct Dirt before the offset its far more complex .
Click to expand...

Thought that too, but that what there calculator returns. I'll look into it further.
 
The main difference between the FA & NIB CAM/Offset are the interest rate....FA have a guarantee attached via tracker but NIB have much cheaper rate....check the 2 web sites.
 
The figure is probably right it can be checked on [broken link removed].

I think after the 6 and a 1/2 years what you have is 170k in savings and 170k of a mortgage, not strictly speaking a paid off mortgage. What FA seem to do at that point however is to automatically pay off the mortgage, you may not want this and may need to keep the savings a little below the mortgage
 
WhatsGoingOn,

I support the idea of CA mortgages; they are just the type of innovative products that we need to encourage competition in the market. However you need to beware of one thing.

I talked to NIB a while ago about a CAM and they claimed ridiculous savings even though their APR was slightly higher than my current tracker mortgage. It turned out that they ask a number of questions re your monthly outgoings and then assume (incorrectly in my view) that the rest of your income is spare. So if you forget anything, as is probable, this means that the forecast is based on an artificially high estimate of your disposable income. This is the reason for the significant savings.

You need to ask yourself, how can a product with a higher APR result in savings. You can always put your spare cash into a tracker mortgage, the only difference being that the spare cash is not accessible once this is done. This may be an advantage or a disadvantage, depending on your view point.

In my case, I went for a tracker with a lower APR and I transfer any spare cash into my mortgage regularly. This combined with the fact that I keep any spare cash in Northern Rock in the meantime means I am better off than if I had a CAM. I loose out a little while the cash is in NR but this is more than made up for by the lower APR.

Depends on whether you like having €100k floating around in you current account!

Hope I've explained this well and that it is of help.

Regards,

dm


WhatsGoingOn said:
Thanks CCOVICH, but according to First Actve, if we take out a mortgage of 260,000 with them over 33 years and we continue our current savings, the term would be reduced by 26 years and 6 months, saving EUR 168,740.18 in interest. I doubt any other type of mortgage could match that (other than maybe NIB's CAM)
Click to expand...
 
Thanks DM.
I agreee with what you are saying with the monthly outgoings, they are not always going to be consisent, e.g. you will have to pay car tax some months, insurance another month etc.
I like the idea of being able to access the cash, you'd never know when it may be needed.
I know I could get cash if I remortgaged and released equity, but if there was ever a property crash and I had negative equity, this wouldn't be possible.


dmkelly said:
WhatsGoingOn,

I support the idea of CA mortgages; they are just the type of innovative products that we need to encourage competition in the market. However you need to beware of one thing.

I talked to NIB a while ago about a CAM and they claimed ridiculous savings even though their APR was slightly higher than my current tracker mortgage. It turned out that they ask a number of questions re your monthly outgoings and then assume (incorrectly in my view) that the rest of your income is spare. So if you forget anything, as is probable, this means that the forecast is based on an artificially high estimate of your disposable income. This is the reason for the significant savings.

You need to ask yourself, how can a product with a higher APR result in savings. You can always put your spare cash into a tracker mortgage, the only difference being that the spare cash is not accessible once this is done. This may be an advantage or a disadvantage, depending on your view point.

In my case, I went for a tracker with a lower APR and I transfer any spare cash into my mortgage regularly. This combined with the fact that I keep any spare cash in Northern Rock in the meantime means I am better off than if I had a CAM. I loose out a little while the cash is in NR but this is more than made up for by the lower APR.

Depends on whether you like having €100k floating around in you current account!

Hope I've explained this well and that it is of help.

Regards,

dm
Click to expand...
 
Hi there,
We're trying to get some information from someone with first hand experience with the First Active Current Account mortgages ( offsetting savings against interest)

I've had a preliminary but detailed conversation with a FA rep and the product seems very good. The mortgage calculator on the FA website at [broken link removed]
makes interesting reading..

Like some of the previous posters below, with a basic saving of 250 p/m and a lump sum lodgement of 10k we will save 80k interest and reduce the term of the mortgage from 27 to 18 years, also the repayment would be typically in line with the best fixed deal on offer at present.. the catch seems to be that the rate is variable, and a tad higher at 5.15%. overall though it seems to be a good value product..

Any experience or advice would be welcomed..
thanks..
BrenD
 
I am trying to compare having a FA CAM (5.3% APR) with say a NIB LTV tracker(4.5% APR). Is there anything on the web where I can calculate how much savings I would need in my FA CAM to make it worth my while having versus a 4.5% interet

When all these savings account paying 7% interest are gone, the CAM may not seem like a bad idea. It is always advisable to have some cash lying around anyway in case of a rainy day/downpour. But my question is how much?
 
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