Pay off mortgage or not?

sunshine_and_rain

Hi, hoping someone can offer some advice please.  My outstanding mortgage is £44,000 and comes to the end of a 5 year fixed deal at the end of June.  I am in a position to clear the balance without any charges and up until yesterday had thought this was the best thing to do as my savings are making no interest and just sitting in a current account and thought it would be great to be mortgage free!  My partner and I are wanting to move house together within the next 12-18 months and it has been suggested to us that paying off my mortgage may not be the best thing to do.  My partner lives with me but is not on the mortgage.  Is it better to keep the mortgage going with a new fixed term rate of 2 years, or look for a tracker mortgage given that we intend to move?  We will be looking for a property together with very little, or no mortgage due to us both having savings, however if we did need a small mortgage is it better to already have one?  My house has recently been valued and I've been told there should be no problem in selling quickly due to the demand.  Thank you in advance.

penners324

How are you pensions looking? 

There are savings accounts paying 1.5%+ at the moment, better than nothing.

If me I'd put half the 44k in a pension and half on mortgage, then a 2 or 5 year tracker

sunshine_and_rain

We both have private pensions which are doing well.  Can I ask why you would choose not to pay off the mortgage?  In my head I'm paying interest on something I don't need to, but that's probably because I don't like to!

steampowered

I can't think of any particular reason to keep the mortgage. Personally I would pay it off.

If anything, having a mortgage makes the conveyancing process more complicated. Because your conveyancer will then need to deal with both your old lender and your new lender.

You don't want a fixed rate 2 year mortgage, as fixed rate mortgages have an exit fee attached. Many lenders do not offer tracker mortgages.

redundantmortgage

I'm in a similar position to you and thought the same thing. It would seem there's no benefit to keeping a small mortgage because when you move it will be a new mortgage you'll be taking out regardless of whether you have an existing one or not. We'll be paying it off on July 1st.

jimjames

Any benefit in having the cash available for when you move in future?

sunshine_and_rain

redundantmortgage said:

I'm in a similar position to you and thought the same thing. It would seem there's no benefit to keeping a small mortgage because when you move it will be a new mortgage you'll be taking out regardless of whether you have an existing one or not. We'll be paying it off on July 1st.

I was told it may be easier to move your mortgage with the new property than start from scratch again...I'm all confused now.

sunshine_and_rain

jimjames said:

Any benefit in having the cash available for when you move in future?

I think that is the question which is making the decision difficult.  I'm thinking pay the whole thing off, my partner thinks keep some cash back.  We will still have savings, it's just not knowing where we want to move to and what we will get as to how much to keep hold of.  If I do keep a mortgage I'm thinking pay of a large sum and keep a £10,000 on a 2 year fixed.  I've just missed out on a 2.4% as had decided to pay it off, now it's up to 2.9%.....I have two weeks to decide before it goes onto a variable at 4.9%!

Mr.Generous

Pay it off, for the smug satisfaction of being mortgage free.

fewcloudy

sunshine_and_rain said:

In my head I'm paying interest on something I don't need to, but that's probably because I don't like to!

I mean if you are going onto 4.9% in 2 weeks if you do nothing, then paying it off seems a no brainer, you will not achieve returns of 4.9% on your money I assume.  I'm not quite sure if anything you've said so far means that it is easier to move your mortgage that start from scratch. Assuming all your finances/figures are good then getting a mortgage from scratch should not present you with any difficulties should it?

sunshine_and_rain

Thank you for all your replies.  My OH is suggesting we pay off the mortgage completely but take out a bank loan for £10,000 to use towards this.  We do have enough savings to pay off the mortgage, however he is reluctant to use the majority of our savings to clear it.  He wants to keep back as much of our savings as possible should we need access to cash for any emergency.  Having said that we will have at least £20,000 savings left.  His reasoning is to take a loan for 5 years but to clear it in 2.  I can't get my head around this and think we should just pay the lot off from savings.  He is wanting to put our remaining savings into premium bonds to try and 'earn' a bit of something, however I feel the interest from having a loan/mortgage just wipes this out....unless we strike lucky with a big win?  So basically, do we pay off the mortgage completely with our savings and have £20,000 left. Pay off £34,000 and take a loan out for the remaining £10,000 and keep more savings and put it into bonds?  We are looking to move in the next 12-18 months if we can find the right property, hopefully with no mortgage to take out or very little.  My head still says pay the lot off from savings and be done with it.  Thank you