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Is it worth keeping a small mortgage?

(6 Posts)
Torrorosso Wed 17-Apr-13 08:00:52

This isn't an immediate issue, but...we have been able to overpay our mortgage, and it should be clear in two years (we're in our 50s, but with two expensive student children to support).

The current interest rate is 2.5 per cent and we have a large overpayment reserve, which we can dip into if needed - that's why any spare money has gone into the account as savings rates are so low. We have virtually no money in conventional savings for this reason.

I like the thought we effectively have access to a low interest rate source of funds if needed, so I'm wondering if it might be best to slow down the payments and keep a nominal amount there even if it could all be paid off? On the grounds that if we needed to borrow money, this is a cheap way of doing it.

Or is it best to clear the mortgage and put the spare cash in ISAs?

ssd Wed 17-Apr-13 08:59:34

I think it would be better to keep the mortgage but am not sure.....

CogitoErgoSometimes Wed 17-Apr-13 09:00:46

I'm in a similar situation at the moment and hope to be paid off inside 3 years. New borrowing against the mortgage probably won't be at the 2.5% deal but it'll be cheaper than a bank loan certainly. I'm not convinced that being an existing customer gets you a better deal and I think I could remortgage in the future from scratch if I had to. However, you're right that you won't get a lot more than 2.5% in savings accounts. Personally, I've opted to pay off the balance and use the spare cash for a combination of making extra payments into my pension, ISAs and various investments.

Toasttoppers Wed 17-Apr-13 09:07:40

Message withdrawn at poster's request.

Torrorosso Wed 17-Apr-13 09:10:53

Thanks. A chat with our IFA is probably in order.

We don't pay any more than the current interest rate for new ' borrowing' as it's a reserve rather than an extra loan. It just means writing to them and the money would come through in about 10 days.

I think it'll depend if we think we'll have big spends ahead in 2 years time - although the main expense is now with the dc going to university.

wonkylegs Wed 17-Apr-13 09:13:53

We had a similar dilemma - we have enough to pay off the tiny last bit of mortgage with savings. We had a chat with our IFA and he said we'd be crazy to pay off the mortgage on the deal we've got (amazing rate) and it was worth leaving at the moment but to review if anything changes.

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