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Virgin One current account mortgages are great for a some people, but they are not suitable for a lot of people. They treat a mortgage like a big overdraft on a current account. Go to a cash point and get a balance update, and it will be a debit number with lots of zeros on the end. However, you can freely spend money up to a preset limit, and if you pay back money, then you don't pay interest on it. If you have money saved in a deposit account for a rainy day, you can pay it into your Virgin One account to reduce the interest you're paying on your "mortgage". This is particularly worthwhile because you don't pay tax on the interest payments that you have saved yourself from paying. One of the other features is that money that would normally be in a current account earning 0.00001% is actually saving you from paying interest on your mortgage. This sounds great. Whats even better is that the customer service from Virgin is praised highly by everyone who ever gets in touch with them. There are only two downsides. First you need the strength of character not to spend all the money that you could do, or you will never pay back the loan. The second is the biggest and its the interest rates that you get charged. They range from being merely adequate if you have a 50% deposit, to being downright scary if you have a 5% deposit. If you have a big salary, thats paid irregularly, if you pay higher rate tax, have a substantial amount of cash sitting in a deposit account waiting for a rainy day, if you can trust yourself not to go on a spending spree when you have a lot of credit available and if you have a fairly small mortgage, then a Virgin One account is for you. For instance a self-employed IT contractor might get paid £80k a year in a few lump sums, and they might have to leave tens of thousands of pounds in a deposit account waiting for their tax bill. They would get the maximum benefit. Similarly if
you need ready access to large amounts of cash (second hand car dealing or antiques trading?) then it could be for you. However, for most people with a regular monthly income, the saving from each month's salary "paying off the mortgage" until it gets used for day to day spending is slight. If you don't have thousands of pounds in a deposit account, and if your mortgage is a lot bigger than your annual salary, then you are almost certainly better off with a less flexible mortgage. If you just want to be able to overpay money to pay off the mortgage more quickly, some lenders (eg Abbey National) let you repay 10% of the loan each year without triggering a redemption penalty. If you want to repay more each month, then you could just ask any lender to reduce the term of a repayment mortgage. They might charge a small administration fee, but that would be less than the cost and hassle or remortgaging.
We are currently looking into setting up a VirginOne account and, in fact, expect to complete the dealings during the next couple of weeks, subject to final details being perused and accepted. There are just a few things I would warn people about, if they are thinking of setting one of these up. The first, and most important point, is that VirginOne solicitors require your house to be registered on the Land Registry. Now, you might think, well that's obvious, but in fact it's likely that your house ISN'T registered if you have not moved home during the past ten to twelve years or more. That was the case with us, and it has cost us several hundred pounds to arrange this to be done. Secondly, you may have to take out extra life insurance to cover any borrowings you want, that exceed your immediate securities such as your endowments; e.g if your endowments total £60,000 expected value and you want an £80,000 facility on the One account, then you'd need extra cover for the £20,000 difference. I suggest you shop around for this cover; VirginOne will arrange it for you, but you could save yourself several pounds per month by going through an independent financial adviser. Similarly, you will be expected to have property insurance for the full value of the house; and you must effect (carry out) any repairs, as pointed out in the mortgage survey, within six months of completion/opening the account. The One account suits those people who are able to keep close tabs on their "ins" and "outs"; the current rates (May 2001) are very compet- itive; and if you have an overdraft with your bank, you'll probably save a fortune by moving it over to a VirginOne facility. E.g we will reduce our own monthly payment on our current overdraft by almost 50%. Finally; do read VirginOne's condition
s carefully, they are quite strict. We haven't yet got up and running yet, but when we do, I shall probably be able to add a new comment under this sector in the future.
I've had a Virgin One account for almost a year now. The concept takes a bit of getting to grips with, as you integrate your Mortgage and your Current account. The whole thing runs pretty much like a huge overdraft. The upside is that any positive balance in your account earns interest -and that goes towards paying your mortgage. Interest is assessed daily, so if your salary goes in at the beginning of the month, you're paying off your mortgage by leaving it there. You can make extra payments at any time. Online banking appears very secure -you initially log in with a code, rather than any name, and the console is easy and intuitive to use. If you need to talk to a person, all the staff seem well-trained and helpful. All in all, I'm very pleased. The only problem I had was swapping standing orders and Direct Debits -Virgin attempt to do this for you, but a lot of companies either don't accept or ignore their communications.