mortgage - paying off v leaving a small mortgage

hastiedecision

Hi, I'm in the fortunate position of being ready to pay off my remaining mortgage (term left 10 years), however a discussion with a colleague at work where he suggested that it maybe prudent to leave say £5k as a mortgage, and lower the monthly payments for the next 10 years, his logic was that having this mortgage will give easy access to a take out and additional borrowing (say for a home improvement/new roof/emergency fund etc.) if I needed to in the future without the need for applying for a new mortgage. To me this seems logical but I'm not sure of the downsides.....any thoughts on doing this?

ButterCheese

If it were me, I would perhaps keep paying the mortgage over the term and put the money instead in a savings account.  Yes, you will still be paying 4 or 5% on the mortgage (or whatever rate you got at the time) but you might be clawing some of that back in interest on your savings now they are a bit better at 3-4%.  It then leaves you with cash in hand in case, like you say, you need to do any home improvements or make a suprise big purchase.

It does all depend on your income, what age you are, how long you have still got to work, and how long you want to keep working.  The downside to keeping the mortgage going is that in 10 years you have to be sure that you can still pay the monthly installment.

Also remember that you can always take out another mortgage if you urgently need it (say if a roof collapses).  Rates at the minute are slightly better than they have been - about 4.09% rather than nearly 4.9% this time last year.I don't know what the future forecast holds though.

So it's pretty much a personal decision.  On a purely value for money basis - it's cheaper to pay off the mortgage (check what the fees are for paying it off early), but then you don't have that money as an instant safety net with no ties.

South_coast

I've never understood the logic of not paying it off in full. Not all lenders will allow a borrow-back facility, you'll have more monthly cash by clearing it in full (ie so you can save up for works), and you can always borrow again. Just make sure you won't be hit by excessive penalties for doing so (and by excessive, I mean more than the cost in interest of continuing the current monthly payments. Personally, I was hit with penalties, but it was worth it to me to know that it was done with)

MFWannabe

How old are you? 

Will you still have savings after you pay off mortgage? 

What is the likelihood of wanting to do home improvements 
what’s your monthly mortgage payment? 

Personally I’d pay mine off in full if I could 

Lumiona

It wouldn't be worth it for me, my SVR would be 8% on the mortgage. I'd not get better than that in savings, I'd rather pay it off in full.

V3cash

I think it’s really personal and depends on the situation and if you can save more in a higher interest account.
I also grudge paying redemption penalties so if I had a fixed rate payment  I would overpay and wait til end of fix to pay off mortgage.
My present interest rate is 2.79% so if I had the £ to pay off my mortgage I wouldn’t until end of that period, I’d save it.
definitely depends on Situation.