Please settle this arguement

Help_Wanted

I have no outstanding debts apart from my mortgage. If I don't have the money for something I don't buy it unless it comes interest free credit or if it's essential then I take out a short term loan (Zopa) which I pay off as quickly as possible.

I have had a long standing discussion with my husband about paying off the mortgage quickly but he keeps saying that it's the cheapest loan you can get and that if we wanted for example to build on a small extention to the house then we can add to the present mortgage. If however we pay the mortgage off, my husband seems to think that it's not easy to get another one (he's 50) and that would mean a more expensive loan. We presently have an offset mortgage and although we don't have a lot of savings we do pay approx £200 more each month towards the mortgage. This eats into the capital we owe and recently a policy has matured which is also off set against the mortgage although we intend using some of this for a new bathroom.

Is he right in saying we should keep the mortgage? Would we be able to get another one if we decided to add an extension to the house? We are both in full time employment.

lazarou_true

I think that you are probably right. You could try asking the lovely people on the mortgage-free wannabe board, as they are knowledgable on this sort of query.

wymondham

I'm not an expert, but if you're planning on home improvements then you're likely to have a better deal if you add to the mortgage you already have rather than start from scratch again...??

homer_j_3

Mortgages are not a cheap loan due to the term they are taken over. You end up paying at least twice back to what you borrowed. You have an offset mortgage which will carry the benefits of you being able to reduce the amount down to a very nominal amount and still draw back on this for any works that you need. I would not be put off by trying to heavily reduce your mortgage debt as you could probably strike a compromise on ideas as such in keeping the mortgage just about open and having peace of mind that you have the ability to drawback on your overpayments for any extension.

The issues you do have is that you then have to pay this back again once you have done it as you increase the debt again.

Kez100

We have an offset that allows us to always reborrow back up to the original level. My intention is to pay it off until we get to a low figure - under £5k ish and then pay interest only or a small amount of capital to keep the 'deal' we have to borrow cheaply and instantaneously if we need it. To a certain extent you are both right it's finding the product to allow you to do this - and at the right rate, as well.

Doing this, however, we have to be mindful of the date the mortgage expires - eight years time in our case. The closer we get, we might borrow some of it, but it wouldn't be much as it would have to be redeemed pretty soon.

Help_Wanted

Thanks to lazarou_true, wymondham, homer_j and Kez100 for your replies. I think I'll try to pay off the mortgage to around £5000 and pay the interest, although if I could save £5000 in savings that means I could offset the savings against the mortgage. That sound like the best way forward. The mortgage completion date is around 2013 so that gives me 5 years to play with. Not relishing the idea of telling my husband he may be right..... that's not normal practice in our house:D

Thanks to all who replied:T

nrsql

Mortgage is a cheap loan probably cheapest you can get apart from 0% deals.
As it's an offset you can pay into the offset account rather than pay off the mortgage with the same effect. No need to leave 5000 - you can offset the full amount and pay no interest (or payments).
If you can find better paying savings accounts it would be better to use the money for that though - check the rates after tax.

Geoff13_2

Be careful on offsetting the full amount, as some lenders will close your mortgage once you get to this stage - often without checking with you first!!!

Rabiddog_2

A mortgage is secured against your home. So there is, however slim, the chance that you wont be able repay and your home gets repossessed. That wouldn't happen with a credit card or non-secured loan.

poppy10_2

I still think your husband is right - if you need access to funds, the mortgage would be the cheapest route in general, as long as you intend to make overpayments to pay back the amount.

tonyE1

A mortgage is undoubtedly the cheapest form of loan, but if you are talking about small loans there are so many around which are only 1 or 2% over typical mortgage rates such that in absolute terms it makes very little difference.