To Pay off or not pay off?

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roswell
roswell Posts: 2,447 Forumite
in Mortgage-free wannabe
Evening,

Just noticed this board what an excelent idea, I have been thinking of doing this for the last 2 months. My morgage is 16,680 ish by july I should be £1000 shoft of paying it off, my morgage is an offset and i have the facility to withdraw overpayments and reduce the cost instead of the term ( Currently set to reduce term) I was thinking that if i paid off all but £1000 I could leave it open for the remaining 192 months making small payments and still have the money in the house (litteraly) for any emergancies as my emergancy fund would then be in the morgage (Till i can build another emergancy fund from the reduced payments).

Any thoughts on this ?
If it doesnt pay rent sell it.
Mortgage - £2,000
Updated - November 2012

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  • jobbingmusician
    jobbingmusician Posts: 20,343 Forumite
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    It sounds like a good idea. Apart from the benefit you have identified, I've also heard that leaving a small amount outstanding on the mortgage can benefit you financially as the building society then stores the deeds 'free' for you. :D (If you pay the mortgage off, you have to find somewhere very safe to store the deeds. I think. But this may have changed now - did I hear about a computerised system that means that deeds are less crucial?)
    I was a board guide here for many years, but have now resigned. Amicably, but I think it reflects very poorly on MSE that I have not even received an acknowledgement of my resignation! Poor show, MSE.

    This signature was changed on 6.4.22. This is an experiment to see if anyone from MSE picks up on this comment.
  • lowedb
    lowedb Posts: 77 Forumite
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    roswell wrote:
    Evening,

    Just noticed this board what an excelent idea, I have been thinking of doing this for the last 2 months. My morgage is 16,680 ish by july I should be £1000 shoft of paying it off, my morgage is an offset and i have the facility to withdraw overpayments and reduce the cost instead of the term ( Currently set to reduce term) I was thinking that if i paid off all but £1000 I could leave it open for the remaining 192 months making small payments and still have the money in the house (litteraly) for any emergancies as my emergancy fund would then be in the morgage (Till i can build another emergancy fund from the reduced payments).

    Any thoughts on this ?

    This is exactly what we did. We worked out how much we would want to have available for unplanned events, and made sure we had this in a separate place before we lost the ability to withdraw that amount from the overpayment fund.
  • Prudent
    Prudent Posts: 11,450 Forumite
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    I kept this option open for a while when I paid off my mortgage. I had a flexible mortgage which allowed me to 'redraw' any overpayment. I saved until I had an emrgency fund before letting go of this safety net.
    Frugal Living Challenge 2024 CROFT Crafting: £84/300, R (visiting daughter): £145/£500 Outside activities: £114/244 (Allotment), Outside 2 (Mud monsters et al) £127 F(Family visits): £50/500 Tummy (food budget): Aiming to use full budget monthly of £200
  • roswell
    roswell Posts: 2,447 Forumite
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    Thats my plan I may actualy be able to reduce the payment to £1.55 a month by july (all things going to plan) and as my current account only pays 0.1% interest and is currently offset I may just leave it at the £1.55 a month for the rest of the term.

    Although may be a little dishartening that a macdonals will be more than my morgage payment .... a big mac and fries or pay another month off .... mmmm
    If it doesnt pay rent sell it.
    Mortgage - £2,000
    Updated - November 2012
  • lynnechapman
    lynnechapman Posts: 219 Forumite
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    We have a current account mortgage with the RBS and have paid off £40,000 over the last couple of years withe some judicous money-saving and cashing in the endowment. We now owe £10,000. I could cash in some premium bonds which we bought with my husband's redundancy money a few years ago, and clear it off. But because we put every penny we have through the account, often we are only £3,000 - 4,000 "overdrawn". The interest charges are about £35 per month. I wonder whether we should pay off the mortgage or if it's worth paying the interest to have that £10,000 cushion. I'd be grateful for your thoughts.
    Thanks
    Lynne
    The Stephen Sondheim Society
  • Thefunkygibbons
    Thefunkygibbons Posts: 1,381 Forumite
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    Premiun bonds prizes equate to a tax free rate of just over 3%, which is lower than the charges on a normal mortgage rate.

    However, on £10000, you might earn prize the equivalent of £25 a month which is less than your £35 cost

    However, it is pretty marginal so given that you have achieved this so far by keeping the pressure on yourself, it may be worth carrying on as you are until it is all gone
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