N1gel 1970

guy at work is convinced he wants to pay his mortgage off and should be able to do so by the end of the year.

another bloke here reckons he shouldn't as the mortgage company (building society) will hold onto the deeds to the place for nothing

first guy says that he can sort out a safe for the deeds and wants to get rid of his mortgage

i haven't got a clue although i sort of side with the first bloke as it must be nice to live (almost) debt free

what do you reckon?

AndyC_772

iTrader: (2)

Normally you can leave a nominal £1 outstanding, and the bank will look after the deeds for you. It's cheaper and easier than paying for a safe deposit box.

IMHO the downsides are:
- if you need a loan for anything, borrowing it back against a flexible mortgage is cheaper than taking out an unsecured loan, and is likely to have more flexible repayment terms too
- if you have the money to pay off the mortgage early, you may be able to get a better return on it elsewhere. It's a risk / reward trade-off that you have to make for yourself.

^OPM^

I paid of my mortgage as fast as posible and found a local solicitors that will keep my deeds free of charge for me- i actually thought now that as all ur deeds etc where kept on file at the land registry now on computer that the actual paper deeds where fairly well worthless? not sure tho

Scooby-Doo

I have £1 outstanding with Nationwide and the deeds have been placed in a holding account. To pay the £1 off will cost £71 as they have a deed release fee !!!!

53

iTrader: (41)

Depends on what mortgage you have and whether your cash is invested at a better return than your mortgage rate.

stilover

I can't see any drawbacks from paying your mortgage off early. I'm so convinced, I'm actually paying mine off next month. £50,000.

Over the period your mortgage, you pay over double back. So a £50,000 mortgage over 25 years would cost you in excess of £100,000.

The way I see it (and the reason I'm doing it) is that I'll have more desposible income. This will allow me to save up to buy my next car (Focus RS) for cash, it'll also give me extra cash to spend on things I want. ie, big TV's etc.

Also on top of that, I have no immediate plans to move, so I'll have a few years to put money aside so when I do move the mortgage amount will be less, as I'll have more to put down.

The plan then is that within 5 years of moving, I want to be mortgage free again.

stilover

You don't need your money to be invested. The amount of money you'll save in interest payments alone make it common sense.

speedking

Keeping £1 on deposit may allow you to not pay the huge arrangement fees that BS's are currently charging to new mortgagees. These can now run to several £1000s. The 31 outstanding costs nothing to maintain. Of course if you go to a different provider then this will have no benefit.

Although currently you have no need to move, circumstances can change quickly.

MikeCardiff

iTrader: (2)

If you arent planning on selling the house, or adding to the mortgage then pay it off - just so you know YOU own your own house completely, not someone else.

The paper deeds are now apparently worthless as the land registry keeps electronic copies as the official versions, so there isnt any reason for you to pay someone to keep them for you.

The only downside I can see is if you are planning on moving again - my parents are in this position and they could easily pay of the remainder of the mortgage, but then getting another one at their age would be more awkward at a decent rate as most of the really good rates are only given to people remortgaging as the lenders are trying to pinch mortgage custom from another company.

Personally I would pay it off, if it means you are in a position where you own everything you have, and dont owe a penny to anyone then thats great.

53

iTrader: (41)

True, BUT you are losing investment return if you invest in the mortgage rate (say 5%) you are repaying rather than keeping the debt and investing in a higher return than 5%.

It doesn't make 'common sense' to repay the mortgage rate in all cases. It very much depends on the type of mortgage you have and where your money is kept that you would use to repay it.

If its a buy to let mortgage it makes no sense at all to repay it.

boxst

That isn't quite true? I sat down and worked it out a while ago as I had a lump sum that I could use to pay off some of my mortgage or invest. It went along the lines of that mortgages are 'top heavy', i.e. in the first years you pay the significant proportion of the interest, so you have to be earning at least double the amount of interest (mine worked out at treble I think) to get the return on investment. i.e. I needed 15% return to get the same amount of money as the immediate savings on interest if I paid back the mortgage.

Prepared to be laughed at now if my sums were rubbish

Steve

53

iTrader: (41)

Brit_in_Japan

My building society posted me my deeds in the post. Not recorded delivery or anything, standard first class mail. They said that the Land Registry has the electronic copies and that it was their policy not to hold them any further. Therefore if that's your friend's only reason for not paying off the mortgage in full, tell him not to bother.

AndyC_772

iTrader: (2)

That's not true, though, because if you save money rather than paying off the mortgage with it, you earn compound interest on it. Do corresponding sums and you'll work out that, even if £1 paid off the mortgage saves you £2 in the long run, that same £1 paid into a savings account paying the same interest rate will end up worth £2 anyway.

There are two important differences, though:

- mortgage rates are always higher than savings rates. That's how banks make money, after all. But more importantly:

- you pay tax on income earned, but not on expenditure reduced. So, contrary to the saying, a penny saved is NOT a penny earned. It's quite a lot MORE than a penny earned.

N1gel 1970

i had heard that elsewhere, but wasn't sure if it was correct