Settlement of Mortgage, yes or no!!

jogo_3

My husband died last year and his life assurance policy will enable me to pay off the mortgage which is currently with A&L and is a repayment mortgage. I have 2 children under 14 and only work parttime earning approx. £11,000. There is still £55,000 approx. due on the mortgage which has another 13 years to run. I think it would be nice to have this burden removed but my lawyer advised me not to pay the mortgage off and on the other hand my financial adviser said I should, confused or what! Any advice on this mater would be greatly appreciated. Thanks

herbiesjp

What was the reasoning behind their answers?

jogo_3

They did not give a reason, apart from my financial adviser saying that it would probably help my peace of mind to have that particular financial burden taken away. The Estate is only now being finalised and we have not talk about it again since the initial first discussion.

MarkyMarkD

If you can't earn a better rate of return on the money (after tax) than the mortgage rate, AND you don't need it to meet any immediate or planned expenditure, then it's probably sensible advice.

It's unlikely that you can earn sufficient return on the money after tax as you'll exceed any possible ISA limits etc. with an amount of £55,000.

As an alternative, though, if you might need some of the money in the future, it might be better to overpay on the mortgage (if it's a flexible one) but leave the mortgage running with a nominal balance. If you do this, you could draw down on the overpayment if you need it in future, without any further underwriting or other hassle. If your current A&L mortgage is not flexible, and you are not tied in to it, you could switch it to a product which IS flexible (and which has no fees) and then repay as much as you wish to.

If you are currently tied in to the A&L product, it probably would just be better to redeem as any penalty would be waived in your circumstances.

dougk_2

Personally speaking I see a mortgage as a debt and as such any oppourtunity to remove as much debt as possible is a good thing. I understand you may need some money in the future so I would probably pay a big chunk of the mortgage off but keep some money (£5K to £10k) for emergencies etc.

Sput2001

Ian_Griffiths wrote:

Depends on the fees. Sometimes worth keeping at a nominal balance to avoid finalisation charges and of course you can borrow on it again if necessary without more setup fees.

No right/wrong, but consider your needs in the future.

This sounds like the most likely explanation - you may incur a fee if you completely pay your mortgage off early.

If we paid our mortgage off early (and we can dream!), we would incur a fee of several hundred quid. On the other hand, we can pay everything off except for £1 and avoid the fees completely. We would just pay the interest & capital repayment on £1 for the remainder of the life of the mortgage, and should we need to we would be able to borrow more against it with relatively little hassle.

Johnhowell

Jogo,

I am planning to get rid of my mortgage as soon as possible. I never understood the idea of leaving a bit of debt left just in case you need a loan - you can always take out a secured loan later on. The cost of closure fees (after re-mortgaging Direct Line charged only £90) compared against the debt of £55000 is nothing. With 13 years left on the mortgage I doubt you will incur other redemption costs. If A&L do want extra charges then put in a lump sum.

Just think of the peace of mind - why take out the insurance in the first place?

Regards,
John

jogo_3

Hi Everyone

Thanks for your replies. It seems to be the majority decision is that paying all the mortgage off is the way to go. It has been helpful to have some other opinions.

YOurs
jogo