Should I pay off my Mortgage?

Auldy_Bauldy

So, I find myself in a position to pay off my mortgage. Waheey!!
I don' t have any other real debts other than a couple of hundred pounds on a 0% credit card with a standing order set up to pay it off before the 0% term ends.
I'm 46 and will be considering moving one more time: downsizing when the kids go. Although I'd like that move to be mortgage free, I have to bear in mind that it might be to a more expensive area, so a small mortgage will be necessary.

My choices are:
Pay all of it off and be mortgage free.
Pay off almost all and keep tiny monthly repayments for the next 15 years. (at my current rate that would add about £500 interest)

The reason for considering the latter option is that I've heard it can be more difficult, later in life, to get a mortgage if you don't already have one. So, we'd effectively be buying eligibility.
Is there any truth in this? Surely, debt free with an income would be the best eligibility?

Any knowledgeable advice?
Thanks
Ed.

chappers

There are probably a few things to consider as to whether you should pay your mortgage off.

1. financial benefit, could you invest the money elsewhere and get a return that is better than your mortgage rate.

2. is it worth hanging on to your current mortgage product.
Can't help with regards to the eligibility of any future mortgage, but it might be worth considering whether to keep you current mortgage. For example do you have a flexible mortgage whereby if you do pay it down but keep the product, would the funds still be available to you to draw on again, should you need to in the future.
How much can you actually pay down, are there any restrictions on overpayments.
Is your product portable and if so can you port it at a favourable rate to make it worth keeping, when compared to a new product, should you move in future.

3. If your mortgage isn't flexible are you likely to need access to that money in the future.

If you are thinking of downsizing in 15 years time, surely you are better off ditching the mortgage, either now if your mortgage rate is higher than any rate you can get from investing the money or later if not. Then when you sell up and downsize you will use the money from the sale of your property to buy another property mortgage free also. Obviously this is dependent on where you move too.

Auldy_Bauldy

Thanks.
My current mortgage is cheap, but very restrictive.
However BoE rates aren't going to stay this low forever and, although I can get a tiny bit more interest now, will that apply in 2 years?
I rang the bank and there are no charges to pay off almost all, but £295 to pay it off entirely.
I don't think I could go back and free up more funds later on this deal as they are desperate to get me off it (Base rate + 0.75).
I think, though, if I leave £2000, I get the best of both worlds. Monthly payments which currently would be £12. Total interest of £195 on the remaining period, so I save £100 on the fees: and I still keep a mortgage if I need it for ease in the future.

I think, in the length of time it took me to type this reply, I made my decision.
Thanks.

Goldiegirl

I think the mortgage is only worth keeping if you are considering a further advance in the foreseeable future.


Even so, having an existing mortgage is no guarantee that a further advance application will be approved. You'd have to meet their current underwriting requirements for income, and due to you age, you'd probably be required to pay off the further advance by the time you retire.


If you wanted a mortgage to move house, you'd need a new mortgage anyway. You don't take your old mortgage with you. The old one is repaid in full and you get a new mortgage.


Personally, I'd rid get of the mortgage now - it's one less thing to think about each month.


If I needed a mortgage later, I'd apply for one then - Having a tiny existing mortgage or not wouldn't make any difference to a new application


EDITED to add


More than likely they'll want £295 to pay off the mortgage later. This covers their admin fees, which are the same whether £100000 or £1 is outstanding.


So you'd pay £195 in interest, and then £295 (or more if the fee has gone up) when you are finally ready to pay the mortgage in full

davidmcn

Goldiegirl wrote: »

So you'd pay £195 in interest, and then £295 (or more if the fee has gone up) when you are finally ready to pay the mortgage in full

I don't think they're allowed to put the fee up these days. So you're best just to delay paying it for as long as possible e.g. when you sell.

Goldiegirl

davidmcn wrote: »

I don't think they're allowed to put the fee up these days. So you're best just to delay paying it for as long as possible e.g. when you sell.

Then he carries on paying interest on the mortgage if he doesn't pay it off now

getmore4less

On a Base+0.75% look for savings at a higher net rate.

if mortgage rates go up so will savings rates.

Review savings investments and retirement plans