Shall I pay my mortgage off?

sam1970

I have been making overpayment over the last 6 years taking advantage of low interest rates (I was on 0.3% above BOE for 5 years and now on 0.5 above BOE rate for life). I have got 5 years left to pay off my mortgage but I have got some savings and I can pay off the mortgage by the end of this year..My question is..Is there any advantage in paying off the whole amount? I heard that some people leave small amount (like £5000) on their mortgage although I am not sure what is the benefit of that !! any advice please

HappyBunny

Im in an identical situation with about a £30K overpayment and a £3K balance left.

I look at it that if i paid it off, I would have no savings at all and if I had a large bill I would have to borrow money. By leaving it as it is, I would just borrow back some of my overpayment instead and it would only cost me 2.5% mortgage interest instead of taking out a loan.

_gav_

I would guess it depends on whether you can earn more on savings elsewhere? 0.5% above base is very low, so you will be able to find savings accounts that offer higher returns. Why not simply save the money, safe in the knowledge that you know you can pay off your mortgage whenever you want, plus the fact that it is earning more interest than the mortgage is charging.

HappyBunny

It is unlikely that savings rates will ever exceed mortgage rates.

mumcoll

Best feeling in the world knowing your house is yours and no-one can take it from you.

p00hsticks

sam1970 wrote: »

I heard that some people leave small amount (like £5000) on their mortgage although I am not sure what is the benefit of that !! any advice please

Not sure if it's still true, but I believe the thinking was that if you ever needed to borrow more money or wanted to move, you has more chance of getting a loan or other mortgage from an institution that you already had a small mortgage with than in approaching someone new.

Also, in the 'olden days' people used to leave a nominal amount (£100 or so) remaining on the mortage so that the bank / building society carried on storing the house deeds for free (if you pay off the mortgage then they would have returned them to you). But I understand that now in the vast majority of cases paper deeds have been superceded by electronic entries on the Land Registry entries and so it isn't as important as it once was that these are kept securely (or at all - they may have been destroyed).

ViolaLass

HappyBunny wrote: »

It is unlikely that savings rates will ever exceed mortgage rates.

If your mortgage rate is 0.5% above the BOE rate, it's not difficult to beat that on your savings.

sam1970

Thank you guys for all the thoughts. You are right about saving rates as I am getting now 2.5% on my ISA account but the gain is very small and I am thinking that it is better to clear the mortgage and start new life

SillySod

I have a sub-£100 mortgage with about 9 years to run. One reason I am not in a hurry to pay it off is that the £200 admin fee will be a lot less painful in 9 years than it would be today!