Pay off Mortgage or leave nominal Balance?

SonOfPearl

I am, at last, in the happy position of paying my mortgage off in the next month, before I'm 40! :j

My mortgage company have suggested that instead of paying off the mortgage entirely, I could leave a nominal £1 balance instead. They say that this would mean I can use the account to borrow back money in the future (it's a flexible mortgage, currently only charging 2.5%, and I've made a lot of overpayments).

Sounds fair enough, but is there a downside? Technically I would still have a mortgage, even if only for £1, so would it affect my credit worthiness, or have any other side-effects?

wynnvegas

Many congratulations. I'm 14 months behind you but also interested in this query.

alanobrien

I assume the company supplying the mortgage would also retain an interest in the property which may be registered in the deeds or with the land registry. That is the bit i dislike so when i eventually find myself in your happy situation i shall be clearing the mortgage completely so any charge against the house is removed. Oh and congratulations !

george_jetson

I'm in a similar situation as you. I have an offset mortgage with my mortgage fully offset with a savings account, so I'm only "technically" mortgage free.

I could take the final step and clear the mortgage, but with the way things are I'm keeping it open for now. I see it as a line of credit I can get my hands on immediately if required.

And if I did need to take advantage of this I would be paying a far smaller rate of interest than if I had to take out an unsecured loan.

I would say leave things the way they are, at least until you have a decent amount of savings behind you, for peace of mind if nothing else!

PS Huge congratulations on becoming mf! I wanted to do it before I was 40 but slipped a little and made it while I was 41. Do you have any plans?

StuartGMC

Congratulations, we're like George at the 100% offset, but unlike him have to build some savings to then clear the mortgage.

Whilst it is just £1 are there any other costs like their requirement that you have any insurance cover etc which mean you incur costs over time? How long would the mortgage remain accessible?

Personally I'm with Alan O'Brien and don't want anyone to have a call upon the property - "they can't take that away from me" - so we'll clear as soon as we can and certainly by end of Feb which is mid-way between the 45 birthdays of me and OH. So well done on achieving your goal so early!

One major consideration is thus; do you have significant savings and investments to call upon for future requirements in the home (windows even if replacement will need to be changed once 20-25yrs old)? If so, then it will simply be a personal issue for you regarding the need to list the lender on your buildings insurance and technically the property remaining with a call from them upon it.

Each to their own, my view is the psychological benefit of outright ownership outweighs the access to the cheap cash provided you have the funds available.

SonOfPearl

Thanks to everyone for your kind replies. We have virtually no savings or investments to speak of - absolutely everything has been poured into paying off the mortgage. I like the idea of keeping the mortgage running and using it to borrow back money at a very cheap rate to finance home improvements that really need doing (e.g. new kitchen) or even to replace our car soon (it's 7 years old).

Now that the end of the mortgage is within reach, with a small balance and low interest rates (for now anyway) it suddenly seems less of a millstone, and something we can even use to our advantage for a little while yet.

Cheers everyone! :j

co123456

StuartGMC wrote: »

Each to their own, my view is the psychological benefit of outright ownership outweighs the access to the cheap cash provided you have the funds available.

Agreed. 'Debt is debt' resonates in my mind - even if it's only £1. I'll keep mine for a few months perhaps then ditch it. By removing this safety blanket I hope it will motivate me to save some hard cash for those emergencies.