How much mortgage to keep

[rainydogday]

I had a very unexpected gift of money from a relative which will help bring our mortgage down to 30k. We have been overpaying also so that has helped. Do we keep paying it off or spread the amount over more years? I am 43 DH 46. Kids 12 &15. I work in nhs so will maybe an ok ish pension. DH not a very good pension at all. If we carrying on overpaying we will free of it in 3 years. Then would save towards pensions or ISA's or university help for kids if needed. I have heard some people keep a small amount of mortgage to enable borrow back or extend if needed, but how much? We also pay critical illness cover which is £60 a month! That is only for the life of the mortgage so is this worth it still? Any wise words appreciated

What is the interest rate? It should be very low, so you can usually get better growth with investments, especially as if your DH increases his pension contributions he will also get tax relief.

Are you currently in a deal with the mortgage and have you checked for early repayment penalties? If you're not in a deal, reducing the amount outstanding might mean you can qualify for a better rate by remortgaging, so it could be a good plan to extend your mortgage term to 20 years and benefit from a small monthly payment at a tiny interest rate - you could get under 1% but you don't want anything with fees as the mortgage is small. You will then be able to concentrate your spare money on investments that are likely to grow by more than this over the long term.

We are on the standard variable rate. Our mortgate had no repayment penalties, so I paid it all off except for £1k. Our current monthly mortgage payment is £7. There is 15 years left on the mortgage, so I just leave it ticking over at that. If we ever want to, we can take back our overpayments (about £60k) and remortgage then if it's beneficial. Being on the SVR is not normally recommended, but with such a small monthly payment, any remortgaging fees would dwarf the effect of any rate change, so it makes far more sense for us to just stay on the SVR.

Meant to say, sorry, this is for when you have paid down most of your £30k. Until then, you have to balance the rate you are paying on your mortgage with whatever rate you would receive in interest/investment gain.

When you say "borrow back" do you mean your overpayments are held in an overpayment reserve?

Our mortgage has very little left on it but we won't pay it off as we have no savings other than what is sitting in the overpayment reserve and we have a decreasing term assurance linked to the mortgage amount owing (after over payment deducted)

We pay a few £ per month and have started saving elsewhere now. Mortgage rate is tiny too.