Pay Off Mortgage Completely or Leave Small Balance?

[SlimJ]

Hi all

We bought our house in 2015 with a 20 year mortgage (HSBC Lifetime Tracker 1.49% above base rate), and we have been overpaying since the start. Based on our current payments we're due to be mortgage free in July 2021 - some 14 years early.

Should we...

A). Pay off our mortgage completely on or around this date and be done with it.

Or...

B). Leave a small balance (ie, £1500, which would equate to around £10 per month for the remainder of the term) which would ensure we maintain our credit record and may make it easier should we decide to remortgage in future (we're planning for the possibility of an extension in around 5 years so may need the additional funds although by not paying a mortgage we should have enough to do this without any additional finance).

This is our only debt.

Thoughts from those with experience in this would be useful!

[Terminator X]

Paid off mortgage after 6 years, I'm guessing you don't live South of Watford!

TX.

[SlimJ]

Yes, Kent actually.

[leef44]

It's a personally decision really. In my case, I paid it off because I will only be downsizing from now on so no longer need a mortgage nor can I be bothered to go through the stress of any house improvements.

Your mortgage may have the flexibility of getting funds back from the overpayments. If so then this provides a useful line of credit. If not needed then might be a good idea to release yourself from the burden and have it off your shoulders.

If you are less risk adverse, you might want to use the funding for investments gambling that you can make a better return than the interest rate.

If you pay it off, then make sure you get confirmation letter from your mortgage company that they have released the charge on your title (don't forget there is an admin charge, might be a few hundred quid which has to be paid at some stage).

I have yet to do a title deeds check just to make sure the security has been removed. this is useful to do before you look to move house next - you don't want this little hiccup to hold up any conveyancy. But wait a few months after the confirmation to give time for the system to update.

[ChocolateFrog]

I paid mine off.

Was nice to not to have to even think about it.

I was in the difficult position of having bad credit and not being able to remortgage at a reasonable rate. If a reasonable rate had been open to me I probably would have done that as I'm sure I could have made the money work better than 1.5%. A lot more marginal with the 6% I was looking at.

The only debt I have now is student loan, which will probably expire rather than getting paid off.

[JulianPH]

Pay it off and pop a cork or two!

[xx99xx]

ChocolateFrog said:

I paid mine off.

Was nice to not to have to even think about it.

I was in the difficult position of having bad credit and not being able to remortgage at a reasonable rate. If a reasonable rate had been open to me I probably would have done that as I'm sure I could have made the money work better than 1.5%. A lot more marginal with the 6% I was looking at.

The only debt I have now is student loan, which will probably expire rather than getting paid off.

I thought you had to pay off student loans when income is above whatever threshold is set? And I imagine someone who can afford to pay off a mortgage would be earning over that threshold?

[Glosphil]

Paid off mortgage when I was 55 (18 years ago) & have never bought anything on credit.

[leef44]

xx99xx said:

I thought you had to pay off student loans when income is above whatever threshold is set? And I imagine someone who can afford to pay off a mortgage would be earning over that threshold?

The scheme is more generous than that. You pretty much have to be a higher rate tax payer for a fair chunk of your career within a decade of graduation to fully pay off your student loan.

A bit off-topic but it was interesting when Labour were complaining about this scheme charging students when in fact it was actually a scheme which only fully taxes you if you become successful (in money terms) in your career i.e. it's actually a tax on the rich.

[Julia121]

SlimJ said:

Hi all

We bought our house in 2015 with a 20 year mortgage (HSBC Lifetime Tracker 1.49% above base rate), and we have been overpaying since the start. Based on our current payments we're due to be mortgage free in July 2021 - some 14 years early.

Should we...

A). Pay off our mortgage completely on or around this date and be done with it.

Or...

B). Leave a small balance (ie, £1500, which would equate to around £10 per month for the remainder of the term) which would ensure we maintain our credit record and may make it easier should we decide to remortgage in future (we're planning for the possibility of an extension in around 5 years so may need the additional funds although by not paying a mortgage we should have enough to do this without any additional finance).

This is our only debt.

Thoughts from those with experience in this would be useful!

Keep a small balance that way if someone tries to claim the house is theirs then they have you and the lender to argue with.

[Caddyshack]

Julia121 said:

SlimJ said:

Hi all

We bought our house in 2015 with a 20 year mortgage (HSBC Lifetime Tracker 1.49% above base rate), and we have been overpaying since the start. Based on our current payments we're due to be mortgage free in July 2021 - some 14 years early.

Should we...

A). Pay off our mortgage completely on or around this date and be done with it.

Or...

B). Leave a small balance (ie, £1500, which would equate to around £10 per month for the remainder of the term) which would ensure we maintain our credit record and may make it easier should we decide to remortgage in future (we're planning for the possibility of an extension in around 5 years so may need the additional funds although by not paying a mortgage we should have enough to do this without any additional finance).

This is our only debt.

Thoughts from those with experience in this would be useful!

Keep a small balance that way if someone tries to claim the house is theirs then they have you and the lender to argue with.

Yes...this. As a broker we get to see the fraud warnings and houses without mortgages are easier targets.

[craigjm]

Either option will make no difference to your credit record. I assume you think leaving a small amount will show your “credit worthiness” and improve your score. It won’t make any difference in reality so don’t bother

[Wacky Racer]

Pay it off and have done with it.

It's a great feeling

[Gareth79]

In years gone by I recall the reason was you could extend the mortgage again easily, but these day I assume the lender will want a full affordability check etc. all over again so it makes less sense?

Caddyshack said:

Yes...this. As a broker we get to see the fraud warnings and houses without mortgages are easier targets.

The Land Registry have a new-ish alerts system which is pretty neat:
https://propertyalert.landregistry.gov.uk/

I have them set up on my house and some older relatives houses and properties. Obviously the property needs to be registered, I imagine unregistered land is targeted more because of that.

[xx99xx]

leef44 said:

xx99xx said:

I thought you had to pay off student loans when income is above whatever threshold is set? And I imagine someone who can afford to pay off a mortgage would be earning over that threshold?

The scheme is more generous than that. You pretty much have to be a higher rate tax payer for a fair chunk of your career within a decade of graduation to fully pay off your student loan.

A bit off-topic but it was interesting when Labour were complaining about this scheme charging students when in fact it was actually a scheme which only fully taxes you if you become successful (in money terms) in your career i.e. it's actually a tax on the rich.

I see. So all the graduates who moan about their debt are just using that as an excuse to moan because they maybe haven't fallen into a £100k job?!

[Caddyshack]

Gareth79 said:

In years gone by I recall the reason was you could extend the mortgage again easily, but these day I assume the lender will want a full affordability check etc. all over again so it makes less sense?

Caddyshack said:

Yes...this. As a broker we get to see the fraud warnings and houses without mortgages are easier targets.

The Land Registry have a new-ish alerts system which is pretty neat:
https://propertyalert.landregistry.gov.uk/

I have them set up on my house and some older relatives houses and properties. Obviously the property needs to be registered, I imagine unregistered land is targeted more because of that.

If you pay off you can remortgage to offset now and go reduction of payment, then 100% offset and draw back anytime you like, go for max term.

Yes that alert is a good idea.

[leef44]

Gareth79 said:

In years gone by I recall the reason was you could extend the mortgage again easily, but these day I assume the lender will want a full affordability check etc. all over again so it makes less sense?

Caddyshack said:

Yes...this. As a broker we get to see the fraud warnings and houses without mortgages are easier targets.

The Land Registry have a new-ish alerts system which is pretty neat:
https://propertyalert.landregistry.gov.uk/

I have them set up on my house and some older relatives houses and properties. Obviously the property needs to be registered, I imagine unregistered land is targeted more because of that.

Thanks, I didn't know about this service. Will it give you retrospective data or only data going forward from when you register?

[leef44]

xx99xx said:

leef44 said:

xx99xx said:

I thought you had to pay off student loans when income is above whatever threshold is set? And I imagine someone who can afford to pay off a mortgage would be earning over that threshold?

The scheme is more generous than that. You pretty much have to be a higher rate tax payer for a fair chunk of your career within a decade of graduation to fully pay off your student loan.

A bit off-topic but it was interesting when Labour were complaining about this scheme charging students when in fact it was actually a scheme which only fully taxes you if you become successful (in money terms) in your career i.e. it's actually a tax on the rich.

I see. So all the graduates who moan about their debt are just using that as an excuse to moan because they maybe haven't fallen into a £100k job?!

Yes, the key is to make sure you never get a good job or progress up the career ladder in the first 30 years

And definitely never make it to powerfully built director status

[LeadFarmer]

I would normally say keep a little on the mortgage if you're on a good rate, so you can borrow money easily in the future. However, I'm on a 0.23% above BoE base rate mortgage, but when i remortgaged last year the bank wouldn't lend additional money at the same rate, instead they created separate rates for the extra mortgage. Still good rates, but nowhere near as good as my main mortgage.

[PostHeads123]

As others said get an off set, I offset my mortgage completely 8 years ago, currently on life time tracker so never need to remorg. I got the facility there to draw down on if I need cash and I just rotate the same £1500 every month to make a payment to keep mortgage company happy.