What's the best option when you pay off your mortgage?

kvnbrcly

Hi
I've read lots about reducing your mortgage but what happens when you actually pay it off, I've heard its better to stay £100 in debt and pay the interest on that so your mortgage dealer still looks after your title deeds, rather than pay a solicitor to look after your title deeds, I live in Scotland so I don't know if its differnet for England and Wales.
Regards.

Xbigman

There are variations on the theory of keeping a small mortgage, to keep your credit record, to be able to remortgage more easily, to keep the deeds safe...

Its all rubbish.
In every scenario there are better alternatives. In the case of deeds, these are on the point of being defunct. Its all electronic now and the physical deeds themselves mean little. Its not who holds the deeds but who the land registry says is the owner. If you do lose the deeds you can get a copy.
All you need to do is get your deeds back at mortgage end and put them with your other important documents (birth certificate, etc) somewhere safe.
Thats if the mortgage provider hasn't lost them, which is becoming more and more common!
Regards


X

kvnbrcly

Cheers Xbigman

steady__eddie

Don't some mortgage providers charge a fee nowadays at mortgage end to physically hand the deeds over ?
A colleague of mine will be officially mortgage free on the last day of December this year and she is begining to plan her celebrations but these have been dampened recently when she heard that she may be charged for the pleasure of receiving a near worthless piece of paper which for some reson or other she had intended to frame !
W.R.T. the comment made about mortgage providers losing title deeds, I see that West Brom Bldg. Soc. have proposed a resolution at their forthcoming A.G.M. seeking permission from members in order that "The Society may destroy any original documents." Would this include title deeds now that they are virtually redundant ?

nearlyrich

We paid off all but £100 (I think) it's not a lot anyway, several years ago, it works well for both parties as we have an easy route to remortgage if required and the Halifax can keep on saying they are the biggest lender as we still have a mortgage. We don't pay interest on the outstanding balance.

kvnbrcly

I have two years of my fixed rate mortgage with the Newcastle left at 3.95, In one years time I will have enough money to pay off the mortgage approx £35,000, (redundancy package), I have been drip feeding the maximum extra but I would like to pay it off early, but there is a 2.5% penalty fee on the outstanding balance, would I be better paying that 2.5% fee and not pay interest at 3.95% or would it be better to let the fixed rate run its period and get an extra years interest on my savings?

jamesd

kvnbrcly,

With a 3.95% interest rate it's unlikely to be better to pay it off. You can earn 4.85% gross from Bradford and Bingley, 3.88% net of basic rate tax. The difference in interest over a year is just seven pounds per ten thousand borrowed, while you'd pay 250 pounds per ten thousand in early repayment charges. At 40% tax on the savings the difference rises to 105 pounds per ten thousand, still too little to make paying it off better.

At a gross interest rate of 4.94% a basic rate taxpayer is better off not overpaying at all. That interest rate is available today from at least one fast access savings account, ICICI at 5.15% AER, though some people have had problems with their administration. It would take 6.59% for a higher rate taxpayer and that isn't available, so a higher rate taxpayer is probably best off overpaying to the maximum no penalty limit.

humfer

Can see both sides of the argument, but the feeling of paying off your mortgage has got to outweigh the complications of safely storing your mortgage deeds....well it would in my case.