Should I pay off my mortgage?

amnblog

But Watson wants to repay his mortgage.

originalmiscellany

Pay off your mortgage, put some aside for treats, and invest the rest in a variety of accounts, short (immediate access), medium and long term savings (stocks and shares?). This would mean that you are mortgage free and should have some income source for the future.

Or consider a BTL?!

jamesd

amnblog wrote: »

But Watson wants to repay his mortgage.

Watson both wanted to repay his mortgage and wanted reasons why that was a bad idea. So I provided some and answered getmore4less's question also.

The main reason for not clearing a mortgage is that it makes you poorer than the alternatives, so you sacrifice the other things you could do with the money you get. But many people will just want the mortgage gone, as Watson does. And for people with nil as their risk tolerance, that's also good choice, though an offset mortgage with 100% offset might be better in that case.

Watson

Thanks for the further replies and the understanding of my desire to see the mortgage gone. Having decided to rid myself of it, I'd now like to do it as soon as possible and so I do have one more question:

I'm going to check this with the Halifax, but is it likely that the penalty for early repayment only applies if the whole of the sum is cleared? If that's the case, could I pay off almost all of the loan immediately, leaving only a token amount to be paid in December when the penalty no longer applies?

Many thanks.

jamesd

You might try phoning them and asking them "Since it's so close to the end of the deal, are you willing to waive the early repayment charges so I can clear the whole mortgage now instead of in November?"

If they say no, you might ask them if they can handle changing your mortgage term so that it will end when the deal ends, with a monthly mortgage payment of say £25,000... Then they might decide to just waive the early repayment charge.

If they say no, ask them how big a lump sum payment you can make now without any extra charges.

I don't know the exact terms of those deals but at a guess you might have a 1% early repayment penalty. On close to £50,000 that'd be £500. I'd try to be patient and spend the £500 on something else.

Watson

Jamesd, thanks as ever for your advice. The penalty is actually just under £1500, so I can certainly see the sense in waiting another two and a half months, even though the psychological appeal of clearing the mortgage immediately is considerable.

I'll see what the Halifax have to say about the matter, especially the notion of paying off almost the whole of the sum and leaving only a token amount. That could be almost as satisfying as getting rid of the lot.

jamesd

I think that you can find better things to do with £1,500.

No harm to let them know that the reason is inheritance. That may help them to decide to be kind and waive the charge.

Watson

jamesd wrote: »

I think that you can find better things to do with £1,500.

I'm certainly not going to argue with that!

I just spoke to the Halifax: the chap there was very sympathetic and completely understood my wish to clear everything as soon as possible, but there was no question of waiving the early-payment charge: he told me that under the fixed-rate terms I could only clear a small percentage of the whole without incurring the penalty: around £9000.

I asked about converting the fixed rate mortgage to a different type and then paying that off, but apparently the charges for doing so would also be substantial. I didn't go into the idea of reducing the term, since by then he'd made it pretty plain (in the nicest possible way) that any attempt to evade the penalty wasn't going to work, even with the expiry date being so soon.

So patience seems to be the order of the day. Now I have to decide where to put my lump sum inheritance while it's still all intact - but I guess that's a question for another thread.