Paying off mortgage - not completely closing it.

[freddy45]

I'm in the lucky position of being able to pay off my mortgage this month.

Building soc have suggested that rather than fully close we leave a £1 in it just in case we want to borrow more in the future.

We have no plans to move and whilst we may extend, we'd seek to fund via savings as the work wouldn't be huge so this seems unlikely

That said, my dm recommended this too so I'm wondering if I'm missing something as I sort of don't see the point?

You wouldn't have the cost of signing all the legal documents to give the lender a legal charge over your property.

Also the lender will continue to hold the deeds so you don't have to look after them (this May all be computerised these days - I'm a bit out of touch).

Yep, I've heard the same thing too. Think I will do this when my time comes.

I was advised by the mortgage lender, the exact opposite just last month. They said even if we kept it open, it wouldn't help with remortgaging as it would always be assessed on affordability at the new time. Deeds are all electronic now. I didn't think about legal fees, though... but on the plus side we'd have the flexibility to choose whichever lender we wanted from scratch... and I hear, after 5 years with no mortgage, you get to claim first - time buyer status again.

My parents have done this. From what i can tell, it's something to do with you being low risk for credit. If you have a mortgage (however small) then lenders are happier to lend to you. If not, and no other credit, you become high risk again as you have no credit history.

I may be completely wrong but that's how i understood it!

We do this. We have maintained a tiny offset mortgage to maintain a good credit history for the last few years and for the foreseeable future. It facilitates getting another mortgage or loan or financial product in the future should we need it. There’s always a possibility - you never know what life throws at you. It’s a minimal cost for the flexibility it offers us. For instance, we have dithered over years whether to buy a smaller place to downsize to/for our future retirement. We haven’t as yet because we haven’t seen anything to tempt us and semi retirement is at least a decade away. However, having access to a healthy credit line means that we could potentially act relatively quickly if we were came across something we fancied.

It depends if you have the building society have the physical deeds or not. Not all are computerised and some are still held by banks and building societies. If they do hold them you may wish to think about keeping open.

We are keeping a tiny bit of our mortgage, to maintain our credit rating.

Great thanks all. Will keep it for credit reasons

Really? We paid ours off with nationwide two years ago and it was never suggested. Our credit rating went straight up on ClearScore after it was repaid because we had no long term debt.

I’m really surprised by these answers. I’ve paid off a few mortgages in my life and every time I’ve done so my credit rating has massively improved (to be fair it’s always been good anyway). I couldn’t be bothered with the faff of leaving £1 in an account just to keep it open.

I'm equally surprised. Paying off the mortgage had a positive effect on our credit rating.

With land registration deeds are all electronic now, so that really isn't a consideration either.

We are in this position as well- mortgage due to be paid off shortly with 10 years left to go but we were contemplating keeping it open as it could act as an interest free loan if we ever needed it (eg car dies, roof blows off). It's an offset mortgage and we can borrow back at any time. We've enough savings to offset what we'd borrow. Credit score is already perfect so no burning need to pay it off completely.

We paid off a mortgage completely 8/9 years ago and have since taken out another one (moved house). Being mortgage free had no adverse impact on fees, applying for a new mortgage or credit rating. When we paid it off we switched to putting the equivalent amount into savings anyway so had a good cushion should we need it. No need to keep your own deeds any more, it's all electronically registered. I just can't see why it's a benefit to keep it open.

If all the deeds are electronic does it matter if you have misplaced the paper originals?

If you have a mortgage of any amount the bank has a charge over your property. I wouldn't trust a bank as far as I could throw them...the sooner I can ditch them being able to take my house the better. I've no idea why you'd let them have that power for just a few £.

There have been a few cases recently where scammers have been able to transfer ownership of property to themselves - all cases had no charges on the property which would have made this nearly impossible to do. That’s one point why you may want a bank to have a small charge over your property.

Also, first time buyer relates to owning a property not to having a mortgage!

Forensic You can set up an email alert with the Land Registry that advises if anyone tries to access your deeds. You'd know if scammers have tried it then.