To pay off mortgage or not?

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Hi all. I'll start by saying that after a search I read a similar thread to this from 2010, but times move on in the financial industry so I'm wondering if the info may change and my question is slightly different.

My endowment is just maturing and I can pay off my mortgage with the addition of a small amount of capital. There is no penalty. The alternative is to leave a small balance say about £1k which I can pay anytime. However, there is a chance we may wish to move or build an extension on our house in the next 5 years or so. In those circumstances does keeping the mortgage live give you an advantage? Are there any other advantages to keeping a mortgage?

If I kept the balance over the remaining 7 year term presumably you pay the monthly cost which is interest plus a tiny amount of capital?

Thanks
 
All depends on the mortgage.

In my case I had started my own business and 3 years down the line it grew in size and I needed to get new people in. 2 people I worked with asked to buy in. I accepted and was able to use the cash received to pay off my mortgage. Did the calculations and it made paying off the mortgage the best option financially. Having full ownership is very 'liberating' and calming. I have since sold my share of the original business and some years ago I retired from full time work in my mid 50s. My health became dodgy and a bonus to all that went before was that had I still needed to pay a mortgage whilst unable to work/earn, I may have needed to downsize.

My advice is to look at all expenditure and match it to income. Remove debts and dump credit card debts within the free payment periods. 28% APR is madness.

Savings that are not bringing much interesr in may change upwards in the future but not this year. If you have a lump sum greater than £25K then it may be worth talking to your bank to see if they offer 'Treasury' accounts where you give them access to your cash capital and they consolidate it to lend it on the money market. You can get a better than savings rare on a 30 day rollover basis. Note though that Japan is currently in negative interest rates so "cash" is not king at present.
 
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I can not imagine why you would want to continue paying interest on your mortgage when the rate will be far higher than your cash could earn for you..in the past there has been times when the interest on old borrowings have been lower than interest earnable.. but not now.
 
Your own advice is best. Leave £1k then when/if you need to raise funds it is easier and cheaper.
 
Terrywoodenpic said:
I can not imagine why you would want to continue paying interest on your mortgage when the rate will be far higher than your cash could earn for you..in the past there has been times when the interest on old borrowings have been lower than interest earnable.. but not now.
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Thanks, but it's not a massive amount on a £1k balance but that's why I'm asking. If it maintains a route to safekeeping of deeds, easy access to further loans for moving/extending and better credit rating it might be worth it. If the consensus is not, then I can pay it off. The feeling of no mortgage looks attractive of course (especially with the X Pro 2 a consideration :-) ) :-)
 
I'd keep a small mortgage and keep the cash, in real world terms if you're building and want to borrow owning 95% or 100% is effectively the same thing. The amount of interest is negligible and having a stack of cash to improve your home without borrowing against it may be more beneficial
Without knowing the ins and outs of your personal finances it's very hard to comment
 
The affordability rules are a heck of a lot tighter so you may find if you wish to borrow more in the future you would be turned down. Then you have sunk the money away into the property with no means of getting it back out again.

If you are looking at moving or extending then I'd do it now when you have this cash floating about. Then pay down what you want with any left over or with any left over after a move. Also when you move they can re-assess you and decide they won't lend or will force you onto a product with a much higher rate of interest. If you have a good low rate they are guaranteed to find a way of avoiding you keeping it.
 
I paid off our mortgage, but kept putting the mortgage payments into a savings account as I was used to paying it. Very handy quick way to build up a lump sum. There's some regular savings accounts that are paying out reasonable interest rate, plus with a larger lump sum it's easier to invest at a good rage of interest in some longer term accounts.
 
I know it's very unlikely but you need to bear in mind that even with a 1K mortgage, if you default on it they could still repossess your house. Unlikely but still possible.
 
Pay off the mortgage. In full. Unless your planning an extension on the next three years, in which case bring that plan forward and pay that from cash as you're unlikely to get a loan on terms as good as a mortgage.

Cash in the bank has very little return at the moment.

Many providers will continue to hold the deeds for you. Or get a local solicitor to do it.
 
There are a number of mentions about deeds. This is irrelevant as many financial institutions no longer store the deeds. I've had 6 inches of paperwork (plans, drawings, solicitors letters etc) for at least 15 years.
 
Pay it off.

Deeds storage only cost about a one off £50 at my lawyers.
 
I think a lot depends on the rate of the mortgage - if it's only 1% like my own mortgage I would be in no great hurry to pay it off as I prefer to have cash to drawn on cheaply if I ever need it. People say they like to "own their property outright" but paying off a mortgage does not give any greater ownership as you own it outright even with a mortgage.
 
boliston said:
I think a lot depends on the rate of the mortgage - if it's only 1% like my own mortgage I would be in no great hurry to pay it off as I prefer to have cash to drawn on cheaply if I ever need it. People say they like to "own their property outright" but paying off a mortgage does not give any greater ownership as you own it outright even with a mortgage.
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Try not paying that mortgage back and see how much you own!
 
Pay it off.
Just finished ours off aged 46.
now sending most of my company money to my directors pension :-)
 
I left 50p on my mortgage and the Abbey stored the deeds for me, no interest payable. Not sure what Santander has done with them though ;)
 
Personally, I'd pay it off if you can - one less debt around your neck.

If you did want to move / extend in the future, you might get a better rate as a "new" customer...
 
andyred said:
Personally, I'd pay it off if you can - one less debt around your neck.

If you did want to move / extend in the future, you might get a better rate as a "new" customer...
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As above, I paid mine off a couple of years back, best thing i've done in ages.
 
Suvv said:
I left 50p on my mortgage and the Abbey stored the deeds for me, no interest payable.
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Nationwide does this for a £1 and that means you are (apparently) guaranteed preferential treatment for a future loan as an existing customer, but presumably also because they are a mutual and I'm a member?
 
Depends on how much your monthly payments are. Mine was £400 a month, once paid off it didn't take long to start building up a nice little nest egg again.
 
Suvv said:
I left 50p on my mortgage and the Abbey stored the deeds for me, no interest payable. Not sure what Santander has done with them though ;)
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Sure it wasn't £100?

That's what Abbey did with me.
 
I always think this is an interesting question. Dispassionately it depends on the type of mortgage you have, the length of term to go and most important aspect, your income situation.

Yes your mortgage interest rate is likely to be higher than your deposit savings rate. However, if your income can afford that difference, why pay off the debt to try to save the difference to get back what you've just gifted into your property? Cash is king and more flexible.

Example 1.
£10,000 endowment lump sum.
Repayment Mortgage £10,000
Mortgage cost per month £400 (capital and interest repayment)
Mortgage replayed after 3 more years
Income, sufficient and repayments not a problem or Financially crippling for next 3 years

Keep £10k as lump sum and put in deposit. Interest = £200pa (assuming 2% pa simple etc etc)
Mortgage interest cost on £10k = £400pa (assuming 4% and compound simple, no capital repayment etc etc)
Cost to you of keeping £10k as cash not repaying mortgage = £200pa

Example 2
You've won £10,000 in a competition you can either have the whole cash now or none of the cash but £200pa for life? What would you choose?

So, if mortgage company would convert mortgage to interest only, or it currently is interest only then repayment affordability is the key. Paying debt off and then saving is counter productive, you already have the cash that you gift to property to try to save the cash back. If ltv of property is high, or repayments a struggle, pay off the mortgage. If not, then it's financially a trickier decision.

Of course, none of this involves any emotional wellbeing. If it makes you feel amazing to have no debt then pay it off. Personally, I don't care as long as I can comfortably afford the repayments so would keep the cash. I can do stuff if needs be with cash that I can't with a small amount of extra income (comparatively). If the large amount of cash is gonna burn a hole and trips to the bookies beckon, pay off the mortgage, if not, then consider carefully all your options.
 
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