Mortgage - clear or leave £100 in it?

[Parsnip]

Hello PH finance people.

What is the accepted wisdom at the moment on starting a new mortgage vs. remortgaging when buying a house?

There is ~25k and 2 years left on our mortgage at 1.69% (with NW) until the end of Jan. We have the cash to clear it. Obviously doing so at the moment doesn't make sense - doing it when the rate jumps up to silly% in Feb does.

We are looking to move and take on a ~300kish mortgage next summer.

So - clear the Mortgage when the fix ends, or wind the monthly payments back to as close to zero as allowed and take a chunk out of the £20k, and why?

[uknick]

I cleared mine as soon as I could as I'd no intention of getting another. I did think about leaving £100 so the mortgage company would look after the deeds etc. But, I accidently ended up paying it all off, by misreading how much was left. Doh!!

But, in your case as you're going to take out another, I'd probably reduce the balance as you suggest until I was sure what my next move was going to be.

Edited by uknick on Tuesday 21st November 12:11

[asfault]

What's the advantage/ disadvantage of the mortgage company looking after the deeds for you?

[deckster]

asfault said:

What's the advantage/ disadvantage of the mortgage company looking after the deeds for you?

There almost certainly aren't any deeds. It's all been electronic for years.

[Sarnie]

There is zero benefit in leaving £100...............just pay it off.

[Martin315]

Sarnie said:

There is zero benefit in leaving £100...............just pay it off.

Is there any value from a credit rating perspective or is this immaterial if you have credit cards?

[mcflurry]

asfault said:

What's the advantage/ disadvantage of the mortgage company looking after the deeds for you?

About 15 years ago I was in that situation and Nationwide kept the file and my credit record open with a nominal balance.
When I moved and paid it off in full they sent me the conveyancing pack and deeds, including damp proof guarantees going back to the 1970s and copies of stuff going back to the 1850s when the house was first built..
The house was then registered with the LR as ownership transferred to the new owner.

[Sarnie]

Martin315 said:

Is there any value from a credit rating perspective or is this immaterial if you have credit cards?

Not really, thousands of FTB'ers get mortgages every year, without having mortgages on their credit files..........

[smn159]

deckster said:

asfault said:

What's the advantage/ disadvantage of the mortgage company looking after the deeds for you?

There almost certainly aren't any deeds. It's all been electronic for years.

Yep, we paid ours off a couple of years ago and no deeds.

[Parsnip]

My question was less about the deeds and more about the "New mortgage" vs "Borrow more on your existing mortgage" question, which looks like Sarnie has answered, so job jobbed.

I'll be in the luxury position of being mortgage free for less than 6 months before owing my salary to the bank again.

[onetwothreefour]

A consideration is that if you pay off the mortgage the lender should get the charge removed from the property. If this is still in process when you come to sell it might make things difficult. We were in your position and advised by our solicitor not to clear the mortgage for this reason.

I don’t know whether this is really a problem or not, but maybe something to consider, especially if you would take a new mortgage with the same lender as then your solicitor is having to deal with them anyway.

[L1OFF]

Martin315 said:

Is there any value from a credit rating perspective or is this immaterial if you have credit cards?

I paid my mortgage off a couple of years ago, my Experian credit rating fell from 999 (it did go back up after a time). It was explained to me that this was because I had become a bigger risk to potential lenders as recovering a debt would be more difficult.

[Sarnie]

L1OFF said:

I paid my mortgage off a couple of years ago, my Experian credit rating fell from 999 (it did go back up after a time). It was explained to me that this was because I had become a bigger risk to potential lenders as recovering a debt would be more difficult.

Yes, your Experian/Equifax score may drop, but they do not lend you money, banks do and it's decided by their own internal score card, not the random algorithmic base figure a credit reference agency produces for you......

[Ari]

L1OFF said:

I paid my mortgage off a couple of years ago, my Experian credit rating fell from 999 (it did go back up after a time). It was explained to me that this was because I had become a bigger risk to potential lenders as recovering a debt would be more difficult.

Why would recovering a debt be more difficult? (Unless you paid it off by selling the house. But in which case the issue would be the lack of a property, not the lack of a mortgage).

[Caddyshack]

There was a recent notice from our compliance team that unencumbered properties were recent targets for mortgage fraud. (Identity fraud) The thinking was that a mortgaged property meant the conveyancers had to do more checks and had a higher duty of care to the lender….more security and therefore having the min left on the mortgage gave a lower risk of target and a small extra layer of protection so I would say leave the £100 there.

[85Carrera]

Caddyshack said:

There was a recent notice from our compliance team that unencumbered properties were recent targets for mortgage fraud. (Identity fraud) The thinking was that a mortgaged property meant the conveyancers had to do more checks and had a higher duty of care to the lender….more security and therefore having the min left on the mortgage gave a lower risk of target and a small extra layer of protection so I would say leave the £100 there.

You can register with the Land Registry for any alerts relating to your property to prevent this.

[85Carrera]

Ari said:

L1OFF said:

I paid my mortgage off a couple of years ago, my Experian credit rating fell from 999 (it did go back up after a time). It was explained to me that this was because I had become a bigger risk to potential lenders as recovering a debt would be more difficult.

Why would recovering a debt be more difficult? (Unless you paid it off by selling the house. But in which case the issue would be the lack of a property, not the lack of a mortgage).

It should be easier as they can enforce against an unmortgaged property without having to compete with someone having a first charge over it

[Caddyshack]

85Carrera said:

Ari said:

L1OFF said:

I paid my mortgage off a couple of years ago, my Experian credit rating fell from 999 (it did go back up after a time). It was explained to me that this was because I had become a bigger risk to potential lenders as recovering a debt would be more difficult.

Why would recovering a debt be more difficult? (Unless you paid it off by selling the house. But in which case the issue would be the lack of a property, not the lack of a mortgage).

It should be easier as they can enforce against an unmortgaged property without having to compete with someone having a first charge over it

Yes, that is true and sort of on the lines I was saying. There is a benefit to keeping a small Mortgage.

[Enut]

Caddyshack said:

There was a recent notice from our compliance team that unencumbered properties were recent targets for mortgage fraud. (Identity fraud) The thinking was that a mortgaged property meant the conveyancers had to do more checks and had a higher duty of care to the lender….more security and therefore having the min left on the mortgage gave a lower risk of target and a small extra layer of protection so I would say leave the £100 there.

I was also led to believe that this may be a benefit of leaving a small mortgage balance.

[Sir Bagalot]

Leaving a small amount, ~£100, will also allow you to ask for the overpayments back for whatever reason.

For those who are fortunate enough to own outright, and even if you have a mortgage, should sign up for Land Registry Property Alerts