Mortgage provider writing off the remaining balance of a mortgage

cheeryoleary

I have enough spare cash to pay off my offset mortgage in full. The term has twelve and a half years remaining. I effectively have a credit line of BOE base rate +1.88% on £151,000.

I understand that if the cost to the lender of servicing the remaining balance of the mortgage is higher than the balance itself, the lender might decide it's more economical to write it off. The administrative costs associated with servicing the mortgage include maintaining the account, processing payments, sending statements (printing and postage), and managing customer service interactions for the next twelve and a half years. 

How much do you think it would cost my lender to administer my mortgage for the next twelve and a half years if I had a balance of £500? Note that I'm not paying interest as the debt is fully offset. Do you think my lender would write this £500 off as a gesture of goodwill if I asked? Is £500 a realistic amount or would you aim higher or lower?

Before anyone replies 'just pay it off and be free', this is moneysavingexpert.com so I think it's worth a try.

Thank you.

Hoenir

Lenders don't haggle that's the bottom line. They operate at the macro level not the micro, Not all business done is profitable that's the nature of finance. 
  

ACG

They dont write it off because it costs more to administer, that would have been built into their pricing usually (there are product managers whose job is to do that). There will be no policy or scenario where they just offer that. 

Where they MIGHT do it, is if you are a high risk, for example you were struggling financially and if they can get back the bulk of their money or risk having to lose a lot more or go to court to get it, they might make an exception. 

But in short, if you go to them and ask them to write off £500, they will of course be very polite but they will say no. They might even have a laugh about the cheek of someone in the call centre after the phone call has ended before answering the next call (have a guess where I used to work when starting out). 

If they offered the facility to write off £500 (or any amount) because it was financially not worth it, they would have to offer it to everyone and not just those who asked. 

jimjames

My balance has been under £500 for a number of years and they haven't chosen to write it off so I don't think you have a lot of hope.

born_again

Profit on a mortgage is massive over it's term. So don't expect a write off over that amount. Cost to administer is next to none, due to computer system doing the work.

Hoenir

jimjames said:

My balance has been under £500 for a number of years and they haven't chosen to write it off so I don't think you have a lot of hope.

And of course they still hold a legal charge on the property. 

user1977

cheeryoleary said:

Before anyone replies 'just pay it off and be free', this is moneysavingexpert.com so I think it's worth a try.

It is, yes. It's not completelypottyideas.com though.

ACG

born_again said:

Profit on a mortgage is massive over it's term. So don't expect a write off over that amount. Cost to administer is next to none, due to computer system doing the work.

Is it? 
Dont forget banks have to "buy" the money in. Whether thats from money markets, governments, savers etc. Their profit margin gross is whatever their mark up on top is. 

From that they have to cover FCA fees, insurance, admin, advertising, offices and everything else. 

saajan_12

cheeryoleary said:

I have enough spare cash to pay off my offset mortgage in full. The term has twelve and a half years remaining. I effectively have a credit line of BOE base rate +1.88% on £151,000.

I understand that if the cost to the lender of servicing the remaining balance of the mortgage is higher than the balance itself, the lender might decide it's more economical to write it off. The administrative costs associated with servicing the mortgage include maintaining the account, processing payments, sending statements (printing and postage), and managing customer service interactions for the next twelve and a half years. 

How much do you think it would cost my lender to administer my mortgage for the next twelve and a half years if I had a balance of £500? Note that I'm not paying interest as the debt is fully offset. Do you think my lender would write this £500 off as a gesture of goodwill if I asked? Is £500 a realistic amount or would you aim higher or lower?

Before anyone replies 'just pay it off and be free', this is moneysavingexpert.com so I think it's worth a try.

Thank you.

Do you mean that you would leave the cash in the offset mortgage account? If so, then they have easy access to the money, so the cost of sending out a couple of automated letters a year to report the balance is next to none. Its probably more effort to single that one out, decide to write off £x of it, with whatever approvals that takes. 

If you'd pay off the majority except for £500 and withdraw the rest of the money, then they might need to start sending letters to collect payments. You would start paying interest and potentially fees if you were trying not to pay. This could go on for some time and impact your credit history before they decided to give up and save the cost of escalating further. It only really gets expensive at debt collector and repossession stage.. not to send out routine balance and payment information. 

cheeryoleary

ACG said:

born_again said:

Profit on a mortgage is massive over it's term. So don't expect a write off over that amount. Cost to administer is next to none, due to computer system doing the work.

Is it? 
Dont forget banks have to "buy" the money in. Whether thats from money markets, governments, savers etc. Their profit margin gross is whatever their mark up on top is. 

From that they have to cover FCA fees, insurance, admin, advertising, offices and everything else. 

Thank you. It's that cost to cover FCA fees etc, exposure on the £150.5K I could potentially ask for tomorrow as a draw down, and the admin hence my question. The postage costs for monthly printed statements for the mortgage account and two current accounts I hold with the lender would cost £202.27 assuming a cost of 40p per statement and inflation is a constant 2% for the next 12.5 years.

Hoenir

cheeryoleary said:

ACG said:

born_again said:

Profit on a mortgage is massive over it's term. So don't expect a write off over that amount. Cost to administer is next to none, due to computer system doing the work.

Is it? 
Dont forget banks have to "buy" the money in. Whether thats from money markets, governments, savers etc. Their profit margin gross is whatever their mark up on top is. 

From that they have to cover FCA fees, insurance, admin, advertising, offices and everything else. 

Thank you. It's that cost to cover FCA fees etc, exposure on the £150.5K I could potentially ask for tomorrow as a draw down, and the admin hence my question. The postage costs for monthly printed statements for the mortgage account and two current accounts I hold with the lender would cost £202.27 assuming a cost of 40p per statement and inflation is a constant 2% for the next 12.5 years.

Simply opt for paper free and help save the planet.