Daft question- do you clear ALL the mortgage off if you can?

anonymousie

WE are thinking maybe to try to clear the mortgage a bit early- but, it is possible we will want to extend the house soon, and perhaps need to borrow again to do this, would it give us any advantage to leave a little of the mortgage outstanding, or doesn't it matter??

THanks guys!

Jonbvn

The answer to your question depends on your mortgage T&C's. With a small amount of capital remaining, will your lender let you take-out equity? Most lenders will not.

However, you may have an offset mortgage or one where the overpayments are held separately. In this case, it will be much easier.

ailuro2

We can have an overpayment fund on our mortgage, which is where the money is kept until we finally phone up and tell them to take it off the outstanding balance OR tell them to give us the money back. It has exactly the same effect as paying it off the outstanding balance in terms of interest reduction, but you have to trust yourself not to dip into it for holidays and things..put the money in and forget about it until it's time to build the extension.

Of course if you've managed to get a really good deal on your mortgage you could find a higher interest ISA and put it in there.;)

getmore4less

I would look at restructuring your mortgage now, if you can, to give you access to the funds in the future when you need them.

An offset would work but there are other options.
A remortgage now will probably be easier and cheaper than trying to get a new mortgage if you pay the current one off.

The reasons to try and do it now are you have plenty of time to get the right deal and in the future you may not be able to get deal at all, lending criteria might change and/or your circumstances might change.

nearlyrich

We paid our mortgage off except for £125 which keeps our account open but doesn't attract interest, if we wanted to draw down money from the equity we would be in a good position. It also had the advantage at the time of allowing us to store our house deeds free of charge, now with the land registry it's not necessary.