Paying off mortgage - should I leave balance of £1.00?

BlondeHeadOn

Finally we can pay off our mortgage - hurrah! - so I plan to do this next week.

We have a Nationwide flexible tracker, which is fully flexible and allows you to pay off as much as you like - but then keeps the overpayment as a 'pot' in case you want to draw on it again for any reason. The payments are IO anyway, so if I left a £1.00 balance I presumably would not get charged anything.

I can't decide whether to leave the balance at £1.00 'just in case'. I feel a bit nervous about handing over all that dosh for good.....

Has anyone ever paid off their mortgage in this way? And if so, did it cause any problems? Any experiences or ideas?

Thanks in advance!

Simon_gloster

Why would you not want them to take the legal charge off the home that they will in the eyes of the law technically still own?

When a capital repayment or natural redemption occurs, lenders will 'write off' accounts if the balance is, lets say <£25. Its no worth them administering such a small amount, so they'll write the debt off remove their interest in the property.

harvey115

I read somewhere on this forum that Halifax writes off any value below £100 remaining on the mortgage.

BlondeHeadOn

Simon_gloster wrote: »

Why would you not want them to take the legal charge off the home that they will in the eyes of the law technically still own?

When a capital repayment or natural redemption occurs, lenders will 'write off' accounts if the balance is, lets say <£25. Its no worth them administering such a small amount, so they'll write the debt off remove their interest in the property.

I ma not sure that this is the case for these flexible NW mortgages, as I have heard of other people doing the 'leave the £1.00 balance' option. ??

The advantage (as far as I see it) is that the mortage still has 10 years left of term, and if I have the full amount of the mortgage sitting there as an accessible 'pot', then if I need some money at any time I can draw that out again and it is still at the tracker mortgage terms. Much cheaper than a loan, and as I am self-employed I would quite like to have the sense of this in reserve in case of any sudden huge bills. In the meantime I don't have any mortage payments to make. Sort of like an offset mortgage, but without the hassle of having to change suppliers to set that up.

It's probably not very likely that I will need to draw on any of the 'pot', but I am wondering whether it would be good to have that option. This seems a way of keeping my options open, as it were.

Any other thoughts on this?

Thanks!

Simon_gloster

Makes sense if they'll allow it.

The £1 retention back in the day was for borrowers who wanted their deeds to he stored at branches/head offices until they wanted them.

If you can play the system legitimatley, which I think you are, then do it, but dont be alarmed one day if they shut the account down.

harvey115

Ofcourse it makes a lot of sense if your money is only offsetting the mortgage amount and you are still able to take it out when you need them.

I also have an offset account with Clydesdale, with an offset the monthly repayments remain at a given amount. Only the term of the mortgage starts decreasing by default. So if I offset all my mortgage amount, I will still be paying back the same monthly repayment amount. However the mortgage will complete far quicker and close on completion automatically.

I am not sure how this Nationwide account operates though if you are not making any further monthly payments.

If it is working out the way you are mentioning, it is definitly the right way to go for it.

grey_gym_sock

if you don't want them to close the account, is it better to leave a balance of £100 instead of £1?

(genuine question, btw - i don't know the answer.)

katejo

As mine is a lifetime tracker, I think I would probably keep it open with a very small amount. As things stand, i would able to use it if I decided to move house again. I still have a way to go but will get to that point in approx 8 years if the interest rates stay low.

BlondeHeadOn

Right, I checked this afternoon with a phone call to Nationwide, and asked about the £1.00 balance possibility. Yes this is available, and yes it used to be linked to retention of mortgage deeds but obviously that's no longer the case.

I've confirmed that I can pay off everything but £1.00 though, and if I need any dosh in the next 10 years I can just draw against the mortgage 'pot' and start repayments again. The only difference is that apparently this will switch to a repayment plan mortgage not the IO one I have at the moment (I guess for obvious reasons).

I asked the NW customer service person if there are any disadvantages to doing things this way, and she said the only one whe could think of is that the NW will still be seen as linked financially to the house, and for insurance purposes etc. the house is still shown as mortgaged. Apart from that though she couldn't think of any disadvantages.

Sounds like a good idea to me?

BlondeHeadOn

grey_gym_sock wrote: »

if you don't want them to close the account, is it better to leave a balance of £100 instead of £1?

(genuine question, btw - i don't know the answer.)

Nope - apparently for the NW flexible tracker mortgage, a £1.00 balance is quite common.

harvey115

BlondeHeadOn wrote: »

Nope - apparently for the NW flexible tracker mortgage, a £1.00 balance is quite common.

I would still leave a sum just above £100, I do not trust the the customer services staff.