Should I pay my mortgage off?

[TR888]

Im in the lucky position of being able to pay my mortgage off in the next couple of months. However, I hear it's not a good idea for your credit score? I don't understand that. Can someone explain?

In case it matters, I'm 51 and my husband is 50.

I don't know anything about it affecting your credit bit I paid my mortgage off last year and it is absolutely freeing, fantastic feeling

I can see it could affect your credit score over time if you never use a credit card. Not using credit makes your score go down.

Easy fix though, pop a certain amount a credit card per month and have a standing order to pay it off in full.

Would paying it off leave you with enough cash if you had to replace something big or needed money at short notice? We've not paid ours off as it's now minimal but the £40k or so is better in an offset account and not had the mortgage paid off.

We paid ours off, hasn’t affected our credit score.

I do have a credit card I use occasionally and I do use PayPal credit from time to time. Credit score is good.

We paid our mortgage off in October and we have been doing this since, credit score still good.

You can leave a small amount on your mortgage.

Pay it off. Use credit cards paid off with direct debits. Don't keep debt with interest you don't need esp with rates going.up

We paid ours off and to be honest I haven't checked our credit score. We do have a credit card though. But even if my credit score is a bit wonky and needs rebuilding, it's worth it to have paid off the mortgage - it's an amazing feeling!

Same with us. Have an excellent credit score, mortgage paid off 10 months ago.

Thanks! That all makes sense. I do want to pay it off and have that sense of relief... we've been overpaying to ensure we could pay it off sooner, and I can't wait 🙂

You can use a credit card to keep your credit file current but as to whether it's a good idea to pay off your mortgage depends on the rate and whether there are any penalties.

Yes pay it off. It’s a massive relief being debt free and that relief will only increase

What rate are you paying?

Yes I would definitely pay it off! Although if you're still on a low rate and have a while longer on your term, i'd probably keep it in savings/premium bonds for now and then pay it off at the end of your fixed term

The credit score thing is easily sorted, as PPs have said, but whether you should pay it off depends on a number of factors.

Is there an overpayment penalty, is the interest rate higher or lower that what you'd get for putting it in savings, do you have a nest egg already, are you the sort of person who'd actually leave the money in savings or is it better that it goes straight on the mortgage so you aren't tempted? It's very dependent on circumstances I think.

Thanks for all your views. My very cheap rate expires next week and then we go to 6.25%. We can pay it off in a couple of months if we totally empty the tank. That means having zero savings, which I'm nervous to do.

I think I might pay most of it off this month, as there's no penalty, and leave £5,000 for savings (this also means leaving approx £5,000 on the mortgage). I'm expecting a £5,000 payment by November which I can then use to clear the whole thing off.

That sounds like a good plan and pretty much what we did. We had a lifetime tracker for about the last 15 years, so our mortgage was always below about 1%.

When rates started rising, we owed about £30k so just started to pay it off in chunks (this reduced the monthly payment too so we were benefitting from the reduction in outgoings that people see as a benefit of being mortgage free) as it probably wouldn't have been worth trying to get a fix due to the disproportionate affect of fees on a small mortgage and the fact that we could pay the mortgage off with savings and using disposable income.

Something else we did that you could also look at to save interest costs in the next few months and to maintain your savings is transfer some of the balance to a 0% credit card.

You have to do this in a roundabout way - get a 0% spending card and put everything you can on it and use the money you would have spent on petrol, groceries and day to day life to pay off the mortgage instead, but it's worth doing if you fancy doing some advanced level money trickery.

We still owe about £10k on credit cards at 0% but we have savings that more than match it, and I'll probably roll the balances along for as long as I can while it's still profitable.

Agree that sounds a decent plan, if clearing the mortgage is the biggest priority. I would want at least some savings, but obviously the interest on the new mortgage is going to be higher than you'll get in a savings account at the mo, so this seems like a good compromise. Then once the mortgage is fully paid off, I'd prioritise building up a bit more of a nest egg in case of emergencies. Doesn't have to be in cash necessarily.