Keep mortgage or pay it off?

WYSPECIAL

Fixed rate ends at the end of January so there’ll be no penalties for early repayment.

I have the funds to repay and given the fixed rates that were being offered (Halifax) over the last six months plan was to repay it.

I’ve read that fixed rates have dropped recently so have had another look and the latest offers are 4.9% over two years or 4.69% over five years. Are these likely to go any lower over the next few months making it worth keeping the mortgage on for the time being beforehand locking in to another fixed rate? That would mean paying SVR of 8.74% in the meantime.

Are there any other advantages to keeping a mortgage in place? I know people used to say it was worth keeping a small balance outstanding indefinitely but is this still the case?

Eight years left before term ends and I have to repay it.

There is no emotion involved regarding being mortgage free. Perfectly happy to remain mortgage neutral and keep hold of the money if that is a better option.

Thanks.

Andrew1981

Personally I'd rather have the cash available (so not pay the mortgage off) for the freedom that brings.  Have you considered an offset mortgage - that way the savings are still working hard for you, and you have the flexibility should you need it?  Id suggest your rates would drop as you probably have a good LTV.  I've just been offered 3.89% 5yr fix so I'd imagine yours would also drop.

WYSPECIAL

Andrew1981 said:

Personally I'd rather have the cash available (so not pay the mortgage off) for the freedom that brings.  Have you considered an offset mortgage - that way the savings are still working hard for you, and you have the flexibility should you need it?  Id suggest your rates would drop as you probably have a good LTV.  I've just been offered 3.89% 5yr fix so I'd imagine yours would also drop.

Thanks.
How does an offset mortgage work interest wise? Does it basically mean you are earning 3.89% on your savings as you're not paying interest on the money you owe? If that's the case you can get more than 3.89% on savings anyway.

The last few years I've had the money available to repay the mortgage but was unwilling to do so as I was earning more interest than I was paying and would have been liable to pay an early redemption penalty.

Andrew1981

Hi, 

Yes that is how it works - if you have an outstanding balance of, say, £80K, and have £30K in the offset account then you're just paying whatever your mortgage rate is on the £50K.  Totally get that some interest accounts give you close to that, but often they are a headline figure for a small amount, or you need to have them locked in for a period of time.

Others more informed than me may be able to suggest why it would be good to have a mortgage in place (I can't think of one).  As long as your money's working for you and you can earn more than your mortgage interest rate with next to zero risk, that's the winning move in my view.