Early mortgage payment advice please

emilyt

Hi there,
Just need some advice for my friend.
She has a ten year fixed rate mortgage. She has eight years left on the fixed rate.But then still has another ten years before the mortgage will be payed. Think she took out a 25 year mortgage.
Her husband's mum is wanting to pay off the mortgage for them. They owe about £32.000 but will have to pay a early payment fee of about £5000 she said.
Would it be better to pay it all off at once or leave a small amount still owing. Say £100. If she does will she still have to pay the early payment fee. I think she is with the Brittania building society.
Also if all the amount was paid off do you have to pay the building society to hold on to the deeds.
Sorry if there isn't enough information just trying to help my friend out.
Thanks in Advance
Emily

moominyak

Hi Emily,

Thought I'd give you a bump up the list before you disappear from page 1 altogether

I think the Early Repayment charge of £5k will apply to paying off the entire mortgage, it may decrease over the fixed rate period (eg. by percentage, or £5k now, £3k in two years' time etc).

Some (most?) mortgages will allow a certain amount to be paid off each year with no penalty (mine allows 10%, which is far more than I'll ever manage in a year so suits me fine!).

I think the best thing to do would be for your friend to find out exactly what the charge would be to pay off the whole lot - chances are it will be less than the interest they'd pay by keeping the mortgage on until the end of the fixed rate period.

As far as leaving a small amount owing, I've read here that this may be beneficial to a) maintain a decent credit score, and b) that would mean that the BS retains the deeds - but I've also read that deeds are held electronically these days, so it's not the disaster it used to be if the hard copy were to go missing. I've no idea about the credit score!

HTH a bit... hopefully somebody with a better idea than me will be along soon

emilyt

Thankyou for the reply moominyak (love the name).:D
Didn't know that deeds were held electronically.
Thanks again for your advice
Emily