Anything to consider before fully repaying mortgage?
Discussion
I've kept £700 on ours at £10/month but only because its an flexible offset mortgage which has a declining limit over the duration so I've still got instant access to £80K if I need it but my daily cash savings account at the bank also has about £700 in it so I don't pay any interest anyway. Its very tempting to go and buy a flat as a BTL so my kids stand half a chance of getting on the house ladder one day.
I'm an ex CeMap mortgage adviser and in my experience there really is no benefit to keeping a small mortgage at all. Pay it off 100% and enjoy the feeling.
If you are worried about borrowing in the future due to having no history of mortgage payments in the years prior, then don't worry. Any loan would obviously be secured against your existing property, any underwriter will happily lend a percentage of the property value as long as you can afford the monthly payments with your outgoings/credit commitments and you have healthy credit score at the time. The fact you had paid off your mortgage completely 3-4 years previously would not even be a factor given the scenario above.
Once your mortgage is cleared, you are then free to explore the whole market in the future when looking for further borrowing. If you are still tied to one lender you are bound to what rates they are offering on loans unless you go through the lengthy process of changing lenders.
If I recall correctly "owned outright" scored more favorably than "owned with mortgage" on our internal scoring system.
This is not my advice, just for information.
If you are worried about borrowing in the future due to having no history of mortgage payments in the years prior, then don't worry. Any loan would obviously be secured against your existing property, any underwriter will happily lend a percentage of the property value as long as you can afford the monthly payments with your outgoings/credit commitments and you have healthy credit score at the time. The fact you had paid off your mortgage completely 3-4 years previously would not even be a factor given the scenario above.
Once your mortgage is cleared, you are then free to explore the whole market in the future when looking for further borrowing. If you are still tied to one lender you are bound to what rates they are offering on loans unless you go through the lengthy process of changing lenders.
If I recall correctly "owned outright" scored more favorably than "owned with mortgage" on our internal scoring system.
This is not my advice, just for information.
Siscar said:
Perec said:
How do you know this? You seem not to have been involved with a mortgage yourself for some time, so you don't seem well positioned to comment. Unless you work as a mortgage broker perhaps. Do you?
Look, this isn't 30 years ago when you had to have had a long relationship with a lender before they even considered you. Today there are a myriad of people looking to lend, it's what they do, it's their business.
What they are looking for are people who are a good credit risk, if you have little in the way of capital or track record you can struggle but if you have collateral that more than covers the amount you are borrowing it is likely to be much, much easier.
I don't know what the OP's house is worth but it's almost certain to be a lot more than the £30k he's talking about. So long as he has a decent income and barring a few other black flags it really isn't going to be a problem, he'll be their dream customer.
Borrowing becomes a case of picking the lender that suits you, rather than trying to find someone willing to lend. Sure, I haven't had a mortgage myself for years, but I have done things like act as guarantor for loans and in doing so seen the change in attitude of lenders when they realise that the risk profile is minimal on that particular loan.
Borrowing money is easy when you have capital, it's asking people to take a risk on you that is tricky.
As I mentioned above, mortgage lenders like to see a track history of paying a mortgage irrespective of its size. If you've no recent mortgage history it is one fewer indicators that allow a lender to make a positive credit decision about you.
As for the myriad of lenders falling over themselves to lend: Six years ago that was definitely the case. Today, not so much. The situation is better than three years ago, but products on offer are not astoundingly good and borrower scrutiny is far greater.
Oddly your comment about it not being 30 years ago is quite apt. In many ways it is just like 30 years ago. I was able to raise commercial finance right through the credit crunch pretty much on the basis that the bank knew me and I had a relationship with them. There was no new to bank lending at all.
In terms of the OP wanting to borrow £30k against an asset worth much more making him a lender's "dream customer", it doesn't. The dream customer looks a lot more like someone wanting £300k against a £500k asset with two professional household incomes.
You say "the change in attitude of lenders when they realise that the risk profile is minimal on that particular loan." You're assuming that lenders scrutinise applications intelligently on a case-by-case basis from the get go. This happens with high net worth and commercial applications, on bread and butter stuff not a lot of thought goes into the early stages of assessment. Cases that looks complicated tends to get filtered out and "complicated" can be something that to an outside observer appears daft. For example too many credit cards with zero balance, BTL mortgages, little credit history.
Which takes me back to my point that the more ordinary you look, the more likely it is you'll get a mortgage and having a mortgage makes you look ordinary.
Perec said:
Stuff
I refer you to the mortgage advisor above who backed up exactly what I am saying.I'm sorry but you are more likely to have grief borrowing against a property with lender B when there is already a mortgage on it with lender A than you ever will borrowing against one that is owned outright. Sure somewhere out there there may still be a lender with selection processes as poor as those you describe, but most moved on from there a long time ago.
Siscar said:
Perec said:
Stuff
I refer you to the mortgage advisor above who backed up exactly what I am saying.I'm sorry but you are more likely to have grief borrowing against a property with lender B when there is already a mortgage on it with lender A than you ever will borrowing against one that is owned outright. Sure somewhere out there there may still be a lender with selection processes as poor as those you describe, but most moved on from there a long time ago.
What are you basing your statement upon that you're more likely to get a mortgage on an unencumbered property?
Doesn't it depend on your original mortgage product?
I paid off all but £500. The amount of my early repayment is called an "overpayment reserve" by my lender - as per the original contract. Whenever I want any of it back its just a phone call. No fees, no forms to fill in, no waiting for credit approval etc, and its on the same excellent terms on which I was able to borrow in more prosperous days!
I paid off all but £500. The amount of my early repayment is called an "overpayment reserve" by my lender - as per the original contract. Whenever I want any of it back its just a phone call. No fees, no forms to fill in, no waiting for credit approval etc, and its on the same excellent terms on which I was able to borrow in more prosperous days!
Perec said:
Ex mortgage adviser. It's not clear when he ceased being one. All I can tell you is that I deal with lenders more than most people and the way they are currently behaving is quite unlike it was in the past. The presumption used generally be for approval and that is not necessarily the case anymore.
What are you basing your statement upon that you're more likely to get a mortgage on an unencumbered property?
Oh look, if you want to believe that having a few quid left on a mortgage is the magic bullet that gets you another mortgage in the future then go for it, if it makes you happy then that's fine.What are you basing your statement upon that you're more likely to get a mortgage on an unencumbered property?
It's not my experience, and yes, I do have some. It's not the experience of the ex-mortgage advisor above, it also doesn't really make a whole deal of sense unless people are using really unsophisticated screening techniques, but if you want to believe it, go ahead.
Personally I'd just pay it off, be mortgage free and if you want to borrow again in the future sort it out then.
If you are going to need to remortgage in the future, whether it be from an unencumbered or mortgaged property, there will be costs associated.
If you pay off all of your mortgage bar a small amount, you MAY be able to borrow that money back without cost - you need to check your mortgage conditions for this.
If it was a flexible mortgage in any way, they will allow you to take any overpayments back out. If this is not the case, you would have to apply for a Further Advance, which will incur fee's.
This assumes that it's the best deal - it almost certainly won't be.
You could consider an offset mortgage, and plonk it all in the savings account, therefore paying nil interest, whilst still retaining the liquidity of your savings to draw down as and when you wish.
If you would like any proper advice, speak to a broker. I'm happy to discuss the costs etc with you if you drop me a PM.
If you pay off all of your mortgage bar a small amount, you MAY be able to borrow that money back without cost - you need to check your mortgage conditions for this.
If it was a flexible mortgage in any way, they will allow you to take any overpayments back out. If this is not the case, you would have to apply for a Further Advance, which will incur fee's.
This assumes that it's the best deal - it almost certainly won't be.
You could consider an offset mortgage, and plonk it all in the savings account, therefore paying nil interest, whilst still retaining the liquidity of your savings to draw down as and when you wish.
If you would like any proper advice, speak to a broker. I'm happy to discuss the costs etc with you if you drop me a PM.
Bobley said:
I've kept £700 on ours at £10/month but only because its an flexible offset mortgage which has a declining limit over the duration so I've still got instant access to £80K if I need it but my daily cash savings account at the bank also has about £700 in it so I don't pay any interest anyway. Its very tempting to go and buy a flat as a BTL so my kids stand half a chance of getting on the house ladder one day.
Great products they are too, the flexible offset ones. My friend has one at only 0.5% above the BOE base rate, so for the past years its been at these all time lows he has been making overpayments in to the offset account. If the OP has one of these 0.5% above the base rate then it would be advisable to keep that product on. If you pay it off and then need funds later you will not get it at that rate. My friend ls laughing at the moment and for the next few year IMO..
throt said:
Heathwood said:
Decision made. Mortgage repaid in full today.
Quite nice to be mortgage free in my thirties
Bloody good luck to you, mate..Congrats..Quite nice to be mortgage free in my thirties
But then I was so very glad to be shut of that unbelievably incompetent organisation which had the logo involving two bowler hatted gents. That alone was a huge weight lifted.
Ranger 6 said:
Johnnytheboy said:
I have a £1 Mortgage and have done so for some years. Provider has my deeds...
This - we paid our mortgage off (well down to a £1 anyway) as we heard it was zero cost having the deeds stored by a lender than having to pay for secure legal storage each year. The last lender I moved the mortgage for the old house to sent me mine and said they didn't want all the old paperwork (vast pile relating to ownership of the land 40 years before the house was built) as the deeds were all on computer. When I moved subsequently there was nothing in terms of paper deeds aside from the LR printout.
Johnnytheboy said:
I have a £1 Mortgage and have done so for some years. Provider has my deeds, they told me it would be a lot easier for me to re-mortgage in future if I wished.
Obviously they win by me being far more likely to stay with them, but I am in no way obliged to.
I was going to mention this. A lot of customers at work do this (I work for a mortgage provider) and it saves them having the deeds returned or sent to the solicitors who charge for holding on to the deeds. Leave £100 on the mortgage and the monthly repayment amount is less than what you would pay a solicitor to look after the deeds for you. Obviously they win by me being far more likely to stay with them, but I am in no way obliged to.
p4cks said:
I was going to mention this. A lot of customers at work do this (I work for a mortgage provider) and it saves them having the deeds returned or sent to the solicitors who charge for holding on to the deeds. Leave £100 on the mortgage and the monthly repayment amount is less than what you would pay a solicitor to look after the deeds for you.
As said earlier, deeds are an entry on the Land Registry computer system these days, there is no need to pay anyone to store them for you. Of, as I do, you love in an old house they may be a big stock of old documents (mine form a pile about three inches thick) but none of it is needed these days, they are just a useful piece of history for the house.Gassing Station | Finance | Top of Page | What's New | My Stuff