mortage free, what are our risks?

fatbeetle

Ok , this may be complex, so I'm happy to offer any clarifications needed.

This is our situation; we live in Australia and hope to retire in 4 years time. We have a house in Cornwall which we rent out.

We were told last friday that our tenants have given in their notice, such a shame as they are the nicest of people, but they now have a chance to buy their own place.

We may be in the position of being able to pay off our mortgage within the next couple of months. We owe just under £8k on the property, (it's valued at £210k.) To pay off all the mortgage would use up around 90% of our savings, and mean cancelling a few things we had planned to do. Things will also depend a little on what the letting agents forecast is, in terms of getting new tenants in.

How much do building societies or banks (Halifax to be specific) hit you for for paying off a mortgage? (Our mortgage documents are in safe storage over in the UK, and we do not have direct access to them.) Obviously I will phone the Halifax and the letting agents, once I can get a time which syncs with UK weekday office hours Though with my shifts this can be a nightmare.

If we were to pay off all our mortgage, we'd have a monthly income in the UK, what would be our best bet in terms of saving/investing the money?

What are the advantages / disadvantages of an early pay off?

Any/all genuine advice gratefully received.

Best wishes

Thom

Debtslayer

fatbeetle wrote: »

Ok , this may be complex, so I'm happy to offer any clarifications needed.

This is our situation; we live in Australia and hope to retire in 4 years time. We have a house in Cornwall which we rent out.

We were told last friday that our tenants have given in their notice, such a shame as they are the nicest of people, but they now have a chance to buy their own place.

We may be in the position of being able to pay off our mortgage within the next couple of months. We owe just under £8k on the property, (it's valued at £210k.) To pay off all the mortgage would use up around 90% of our savings, and mean cancelling a few things we had planned to do. Things will also depend a little on what the letting agents forecast is, in terms of getting new tenants in.

How much do building societies or banks (Halifax to be specific) hit you for for paying off a mortgage? (Our mortgage documents are in safe storage over in the UK, and we do not have direct access to them.) Obviously I will phone the Halifax and the letting agents, once I can get a time which syncs with UK weekday office hours Though with my shifts this can be a nightmare.

If we were to pay off all our mortgage, we'd have a monthly income in the UK, what would be our best bet in terms of saving/investing the money?

What are the advantages / disadvantages of an early pay off?

Any/all genuine advice gratefully received.

Best wishes

Thom

I can't see your property being empty for long. How much are your mortgage payments each month and how long do you have left on the mortgage? What is the interest rate?
Dependant on what the penalties are for paying it off early then it na just be better off letting it run it's course.

silvercar

Interest on your mortgage would be an allowable expense against rental income.

AnotherJoe

If we were to pay off all our mortgage, we'd have a monthly income in the UK, what would be our best bet in terms of saving/investing the money?

---

You've currently got a monthly income in the UK, what difference does paying an £8k mortgage make except a couple of pounds?

Krash420

If your mortgage is only £8k, you have a lot of equity in the house, and chances are that unless you are on some stupidly high interest rate, you're at a point where you're paying of most of the capital.

It's very unlikely that the charges for clearing your mortgage will be high, as it's usually linked to the interest that you are under contract to pay, and as I mentioned this is likely to be low, so if you do want to clear your mortgage you should be able to do that by using a maximum of 9k.

Now whether or not you should do that is another question.

Firstly, you're likely to get the property on the market again relatively soon so you shouldn't have a gap in tenancy for long, and even if you do, you have the money to pay for it, so you can simply dig into that till it's filled. You'll find that you may have to dig in for a month or two, but after that it'll be filled and will be paying off the mortgage on your behalf.

Secondly, depending on that rate, you may be better off putting it into an account which gives you more interest than you're paying on the mortgage - with 8k you can easily get around 4%-5% in interest, so you'll be growing that money, even if you have to dip in and take some money out. However the fact that you're based in Australia may make this difficult and will depend if you've already got accounts with the banks that provide these (Halifax does not). Either way, on 8k this'll be only a couple pounds savings.

fatbeetle

Thanks guys and gals, some thought provoking stuff there. We aren't likely to sell the house as we will return from Aus to the UK to retire, and will end up living in it.

It's in a desirable spot, (Lands End) so we have never had any problems getting tenants.

So, if you had an income, for example of 500 quid a month coming in for the next 4 years, what would you do with it to maximise it's contribution to your retirement pot?

Thanks again

Thom

Thrugelmir

fatbeetle wrote: »

So, if you had an income, for example of 500 quid a month coming in for the next 4 years, what would you do with it to maximise it's contribution to your retirement pot?

Your UK options are somewhat limited. With 4 years to go your options maybe better focused on Oz.

fatbeetle

Cheers.

@Krash420, 8K is the remainder we have to pay, after paying the mortgage since 1991, not the sum total of the mortgage. The interest rate is the current Halifax standard rate.

silvercar

fatbeetle wrote: »

Cheers.

@Krash420, 8K is the remainder we have to pay, after paying the mortgage since 1991, not the sum total of the mortgage. The interest rate is the current Halifax standard rate.

Currently 3.99%. I'm assuming it is a repayment mortgage, meaning the outstanding mortgage is about £31.5k.

MortgageMamma

I think you should consult an Independent Financial Adviser/Consultant in Oz and get them to go through your retirement options with you. You could possibly look for one that has experience of giving advice in the UK as well as Oz, I'm sure you should be able to find one if you ask around

fatbeetle

Just had a settlement figure from Halifax, £7558.13p to pay, inc fees.

We'll go for it I think.