Should you pay off your mortgage early or keep nominal amount?

C

chabsey

Registered User
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When this eventually becomes relevant to me I'd like to know what the general opinions are. I've heard differing points of view - some people claim that they keep a nominal amount in their mortgage rather than paying it off because it represents a line of credit with good terms and if they need to borrow more it makes it easier. In my case, being on a tracker this doesn't make sense to me as I can't replicate the rate.

Others claim they keep a nominal amount in place because they have critical illness coverage on it and so they like the idea of having that there in case they get sick - but again I'm sure this is achievable directly without the associated mortgage, am I wrong?

My general attitude is, pay off all debts ASAP but I'm curious as to what other people do and whether this 'nominal amount' approach is widespread?
 
Critical illness isn't standard on a mortgage or mortgage protection life insurance. And where it is in place it can often be poor value for money and only pay out in very restricted circumstances and/or for limited periods of time. I wouldn't consider such cover or even life cover a good reason for keeping the mortgage unpaid. As you say you can get such cover separate from the mortgage and maybe on better terms.
chabsey said:
My general attitude is, pay off all debts ASAP but I'm curious as to what other people do and whether this 'nominal amount' approach is widespread?
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I don't think that there are compelling reasons to keep the mortgage unpaid to be honest. Maybe there edge cases where it is useful. Some people used to think that a good reason was that it meant not having to collect and store the deeds but again this doesn't seem like a compelling reason especially when many properties are now registered with Land Direct and the deeds are more easily replaced/reconstituted should they be lost/damaged.
 
We have kept a tiny amount. For the line of credit reason but it is so unlikely that we would ever use it that we really should just clear it off. We kept the assurance as a lazy shortcut but we should really review this!

Some folk keep it going as a way to have deeds stored and keep free banking.
 
Out of interest (pun intended) what do people consider a tiny amount? 500 euro or so? I imagine my repayments would be less than a coffee a month if we dropped that low.
 
I think that there were previous threads on this topic but I can't locate them offhand with the Askaboutmoney or Google site specific searches.
 
chabsey said:
Out of interest (pun intended) what do people consider a tiny amount? 500 euro or so? I imagine my repayments would be less than a coffee a month if we dropped that low.
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Even when mortgage protection life insurance premiums are added in assuming that they continue to be paid?
I suppose that coffee is pretty expensive these days.
 
That's a good point but I imagine you can safely drop that insurance if your mortgage is only 500 euro, should you need to repay in the event of something untoward happening it's relatively easy to do so and doesn't represent a financial burden on any party.
 
The insurance will pay off the small mortgage and then we would get the rest. So it is a life and for us critical illness cover, albiet reducing in line with our original mortgage so we need to review if it is worth keeping.
 
I kept my mortgage with a small amount owing for about 5 years. I think at the time that if I wanted to get a top-up loan then it was a lot easier than taking out a new mortgage. I also didn't have to look after my deeds etc.

In the end I decided to just close it, take back my deeds.
 
I did the same as above poster for a good few years, brought it down to about 5k, reduced the payments and just kept it on but I had an offset mortgage so no interest being paid and it gave me the option of drawing down the facility borrowing should I need it. Added to that my deeds were minded. But when UB decided to get out altogether I just paid it off or should say they did with their payouts!
 
ClubMan said:
I think that there were previous threads on this topic but I can't locate them offhand with the Askaboutmoney or Google site specific searches.
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This one comes to mind, where really tiny amounts may be cleared by the bank.

Bank closed my mortgage account with no communication with me

Hello, can I ask some of you AAM mortgage experts a question please. My bank closed my mortgage account with absolutely zero communication with me. I have been overpaying over the years and made my last overpayment last week leaving a small (intentional) balance of less than €100. Usually when...
www.askaboutmoney.com
 
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I was thinking more of threads that specifically deal with the pros/cons of keeping a mortgage unpaid with a small outstanding balance for whatever reason such as keeping a line of credit open, not having to deal with the deeds, maintaining free day to day banking, etc.
 
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