Pay Off Remaining 20k Mortgage or Remortage for 25 Years?

adzy77

Hi all,

Ive got 20k left on our mortgage with the current fix ending at the end of January, with i believe the option to remortgage fee free from August onwards.

Mortgage is currently 500 but we pay 750 to overpay.

Im wondering which of these 2 options is more beneficial...

1. Look to pay off as much of that 20k as possible and whatever remains remortage on a short deal, paying the 750 a month until its all gone.

Or

2. Remortgage that 20k for a really long period, say 25 years, paying something like £100 a month and overpay now and then and stick the extra £650 we would usually spend in a savings pot for if and when we next move or get an extension?

theoretica

Can you get a mortgage for only 20k?  Also how bad is the rate your current mortgage reverts to? - because any product fees you need to pay may outweigh interest savings.

Edi81

How long is left on the mortgage?
Id stay at SVR for that amount and overpay as much as you can. 

A remortgage involves a new lender not just a product switch and you could find yourself with only having an overpayment allowance of a couple of grand. 

Bluebell1000

If it's going to take 2 years to save enough to clear it, then you'd probably get a better rate on a 2 year fixed mortgage rather than going to SVR, but to avoid hassle I'd look at fee free options with your current lender. I think it depends on how much you could repay in January really...

adzy77

Hi all, apologies for the very late reply on this, mind has been elsewhere!

So to answer your questions, our fixed rate ends in January and there is another 2 years after that. Its 1.99% until Jan and then SVR looks around 5% as it stands.

I probably shouldn't have said remortgage then, I just mean a product switch with my current supplier.

By January we could probably afford to pay it all off and then we save the 750 a month.

Im just wondering if there was any benefits to not paying it off? May seem and odd question I know but someone I spoke to recently suggested it was a good idea to extend the duration of the mortgage so the monthly payments are small and continue to overpay, rather than clear it off and empty my account of a lump sum of 20k. Not quite sure what the thought was behind it and if anyone thought it made any sense?

housebuyer143

Believe it or not, you can get personal loans cheaper than mortgages now, so in your case I would get a loan, pay it off and then pay off the loan over the next 2 years.

The is really no benefit to keeping a loan on a high rate unless you really need or want the cash in your bank.

RelievedSheff

I would just pay it off as soon as you can.

silvercar

Do you have other savings? 

I wouldn’t clear your mortgage and then have no money for emergencies.

I’m not sure if it is true anymore, but it used to be that people kept say £100 outstanding on a mortgage as a way of showing they were responsible mortgage payers. It also keep a mortgage account open that may assist with future borrowing.

adzy77

Yeah we have more than 20k in savings so probably does make sense to pay off and forget about it.

We are looking at extending in the next couple of years though so not sure if to keep a small amount in to make it easier remortgaging

housebuyer143

adzy77 said:

Yeah we have more than 20k in savings so probably does make sense to pay off and forget about it.

We are looking at extending in the next couple of years though so not sure if to keep a small amount in to make it easier remortgaging

Offset mortgage? You can keep the money in your bank but offset fully so pay no interest?

MattMattMattUK

adzy77 said:

Yeah we have more than 20k in savings so probably does make sense to pay off and forget about it.

We are looking at extending in the next couple of years though so not sure if to keep a small amount in to make it easier remortgaging

On that basis if I were you I would pay it off, especially as inflation is fast eroding your savings anyway.