Is it worth keeping a tiny amount on a mortgage when paying it off?

[cloudtree]

We are in the great position of potentially paying off the mortgage on Friday. The mortgage is at a decent rate (1.5% above base rate on a tracker). It's also an interest only mortgage with 5 years left to run.

Both DH and I are self employed. Given the hassle involved in obtaining a mortgage nowadays would it be worth keeping a very small amount on the mortgage just to keep it open? Say £500? Is there any real benefit to this?

Land is registered so there is no benefit in the bank holding 'deeds'.

What is your cash flow like? Do you need / can you forsee a need for money for your own businesses? That's what I'd be thinking about probably.

Just re-read and registered that this is an interest only mortgage. I'd check your ability to reborrow on it, and if you can then yes probably keep it open. Are you interested in borrowing to invest (risky but sometimes a good idea)?

Cash flow is fine. DH is actually a partner (one of over a hundred) in a very large business so technically self employed but not really his "own business" as such. My company is a service business and not the sort which would need personal money injected into it.

We're both very risk averse but with this debt gone it may well be that we might look at buying another property at some stage in the future or extending this property.

Deeds are held electronically now so no bank needed.
Why pay interest to the banks for 5 years.

The interest on say £500 would be piddly so not really an issue. It was more a question about whether there is any advantage eg with getting credit/future mortgages in the future. I've seen it said on a number of occasions that its best to keep a small amount owing on a mortgage that hasn't got tot the end of its term and so I am trying to understand the reasons for those comments.

There used to be tax advantages, these no longer exist. Extending a mortgage 'may' be slightly easier than applying for a new one, but the rules are so tight it's negligible.

No pint in keeping it IMO

If you’ve got an insurance policy that would pay out the amount you took out in the first place should one of you die, it might be worth it?

The insurance is independent of the debt. If you pay the premiums on the insurance it pays out under the terms regardless of whether a liability exists

We’ve paid off our mortgage after a windfall and then a couple of years later decided to invest in a rental property, using a mortgage against our own property to fund it (and rental income pays our mortgage iyswim). Residential rates are far better than BTL mortgages, and we could be on a much lower loan to value ratio. But even though we owned the house and had lived in it for a number of years, and had only paid the mortgage off a couple of years ago, to get another mortgage against it we had to pay for full searches etc. The mortgage company wouldn’t take the old ones, in the same way they would if we had been remortgaging but changing providers. So if you plan on doing anything like that it might be worth keeping a small amount on your mortgage.

We did this a few years ago. We paid off all but a tiny amount and kept it open. So glad we did as this past year we decided to borrow it all back and do a major extension. The type of mortgage we had was not available anymore and it meant we could keep that type as well as not have to go through the painful process of trying to get a new mortgage. I would certainly do the same again in the future.