Do I pay off the mortgage?

[jules_s]

OK,

I'm not willy waving, but I find myself in the enviable (to me two years ago it would have been enviable) position to pay off the mortgage in full.

So do I pay it off in full, or just keep a modest few £k against the house for credit reasons? I doubt there are any tax breaks left for having a mortgage or am I wrong in thinking that?

Cheers all

[Ungarsee]

Depends on lots of factors but can you make more from the money than you'd pay in mortgage interest? I know a lot of people currently sat on dirt cheap trackers who would much rather keep the mortgage and invest their money in theirs or someone else's business for example.

Obviously rates will go back up but we're unlikely to see rates anywhere near as low as they are now for a long long time so I'd make hay while the sun shines!!

What about spending it on a depreciation proof car which you can flog when rates start to creep back up (late summer seems to be the current prediction)? (well it is a car website after all!!)

[Olf]

I would say it depends on the nature of your 'good luck' and your stage in life.

e.g. if there's an outside chance of the revenue 'changing their minds' about something, or kids are yet to go to university or you may want to help kids with their own mortgages etc etc etc then you may wish to keep the facility. The advice ha always been to retain it if you've got it. Otherwise you could pay it off.

[b2hbm]

We paid off our mortgage early several years ago. As others have said, it depends exactly what your current interest payments are as to whether it's worth paying off now or later in the year when rates rise, but at some point I would pay it off if you have spare capital.

What I did was to sort a spreadsheet with our monthly payments to the end of the mortgage term at the current interest rates to see just how much we'd be paying in interest charges. And that's quite sobering if you do it over a 25yr term. Do another worksheet with your capital invested at the best rate you can find, work out the difference and find out if you're in profit or loss. Unless you happen to be on one of the very few base rate only trackers then I think you'll be losing money. So with no tax breaks and assuming you're not prepared to risk your capital, then it makes more sense to pay it off.

Regarding your credit profile, it made no difference at all to us. We still get bombarded with applications for new cards, etc, and we had no problems in extending credit card allowances when we moved house, etc.

As an aside, I think the trick is not to pay off the mortgage then just fritter away your pay packet from then onwards. What we did was to invest the normal monthly payments into a company share scheme & AVCs which made a phenomenal difference to the age I could afford to retire at.

[Mattt]

I remembered once reading some advice to keep a very small amount - for some reason (that I forget) - maybe to do with them looking after deeds or something like that.

[Silver993tt]

Mattt said:

I remembered once reading some advice to keep a very small amount - for some reason (that I forget) - maybe to do with them looking after deeds or something like that.

I paid of my mortgage a few months ago. The deeds were sent to me. I then placed them at my local bank who keep them is a secure room/safe for £10 a year. No need to keep a mortgage going just for safety of deeds.

Get it paid off, best thing I ever did.

Edited by Silver993tt on Tuesday 12th January 08:01

[b2hbm]

Mattt said:

I remembered once reading some advice to keep a very small amount - for some reason (that I forget) - maybe to do with them looking after deeds or something like that.

It depends who you're with I think. Ours was with the Halifax and the terms they had at that point were to keep £1 outstanding and they'd keep your deeds in "deedstore". But you had to keep your buildings insurance with them IIRC otherwise the charge was higher. It's not a problem, you can keep your deeds under the bed if you so wish !

[softtop]

I cannot remember the detail but if you are a 40% tax payer then the amount of money you need to make in interest from a savings account is so much higher than you will ever get. Apart from investing, which could go up or down, you should pay off the mortgage. However, a balanced portfolio is a third property, third shares and a third cash.

[onomatopoeia]

Mattt said:

I remembered once reading some advice to keep a very small amount - for some reason (that I forget) - maybe to do with them looking after deeds or something like that.

Aren't they stored as computer records at the land registry now and printed out as required?

[mcflurry]

AFAIK Nationwide will keep the facility open and the Deeds on file (they are accessible anyway) if you leave £1 on the mortgage

As to the original question, how much is "peace of mind" worth to you?

[Silver993tt]

onomatopoeia said:

Mattt said:

I remembered once reading some advice to keep a very small amount - for some reason (that I forget) - maybe to do with them looking after deeds or something like that.

Aren't they stored as computer records at the land registry now and printed out as required?

correct

[number2]

Don't forget the 'peace of mind' value that the sums don't allow for - knowing that should the worse happen (whatever that is!) you have your house and don't need to worry about the mortgage.

Re. the poster who said not to fritter away what you were spending on payments. I do agree with this to a great extent but please do spend some of the money on doing things you (and your family) have always wanted to do or have. Don't spend it all on beer and stripper, just some of it

Plugging some money into a pension scheme is still (if you earn < £150k p.a.) quite tax efficient and you will appreciate this when you come to retire. (The Government is penalising high earners now.)

[CaptainSlow]

softtop said:

However, a balanced portfolio is a third property, third shares and a third cash.

Is it?

[jules_s]

Thanks for the replies gents

I'm gussing the consensus is pay it off, as their doesn't seem to be any positive comment to keeping a small mortgage.

I think there may be some middle ground in my situation, as I'm selling one property to pay the mortgage off on another (current house)and there will be a significant ££££ surplus to pay for a property upgrade when we sell the current house.

[number2]

CaptainSlow said:

softtop said:

However, a balanced portfolio is a third property, third shares and a third cash.

Is it?

No

As I'm sure softtop knows, one "balanced portfolio" may be very different to another.
To cut a long story short, every investor needs to consider their own circumstances and objectives.

Maybe that was too serious an answer for PH

[softtop]

number2 said:

CaptainSlow said:

softtop said:

However, a balanced portfolio is a third property, third shares and a third cash.

Is it?

No

As I'm sure softtop knows, one "balanced portfolio" may be very different to another.
To cut a long story short, every investor needs to consider their own circumstances and objectives.

Maybe that was too serious an answer for PH

just looking to paint a balanced picture. I have most in property, a bit in cash and minimal shares. Quite right, it depends what works for you. Oh, and a fifth share in a salt mine

[tomash]

Mattt said:

I remembered once reading some advice to keep a very small amount - for some reason (that I forget) - maybe to do with them looking after deeds or something like that.

Its because of a scam where people take out a mortgage on your property using dodgy solicitors and leave you up the proverbial creek full of excrement without a means of propulsion and in debt to the tune of several hundreds of thousands of punds potentially. Therefore its always best to have a £1 mortgage so that this cant happen to you. As any new lender will check to see if theres a motgage outstanding on the property.

Edited to say pay the mortgage off definately, best thing i ever did.

Edited by tomash on Wednesday 13th January 09:05

[Pickled Piper]

There is a scenario where you may not want to pay off a mortgage. If you have a good tracker rate, as an example, that is not available to new customers, the rate may be transferable to a new property when you move. We had this scenario with a flexible mortgage a few years back. We could have cleared the mortgage a year before moving but kept a small balance so that we could transfer the rate when we moved.

Depends on your terms and conditions. Perhaps the mortgage advisors that post on here can chip in.

pp

[condor]

I paid my 'interest only' mortgage off last year when the svr was just under 6%. I'd suggest you check that there are no early repayment penalties.
I was made redundant last month and it's very comforting to know that the house is mine outright, and I can get by on a relatively small amount of money

[traxx]

mcflurry said:

AFAIK Nationwide will keep the facility open and the Deeds on file (they are accessible anyway) if you leave £1 on the mortgage

As to the original question, how much is "peace of mind" worth to you?

They aren't really that safe with the bank - Halifax managed to lose mine a few years ago