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Post by stevepn on Nov 16, 2020 13:15:31 GMT
I have a relative who has an interest only mortgage of about £2,000. I keep telling him to pay it off but he says it is better to keep it going. Is he correct?
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r00lish67
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Post by r00lish67 on Nov 16, 2020 13:47:24 GMT
I have a relative who has an interest only mortgage of about £2,000. I keep telling him to pay it off but he says it is better to keep it going. Is he correct? It depends. If the interest rate of the mortgage exceeds where they otherwise store the cash, that's an argument to pay it off. On, the other hand, keeping up regular mortgage repayments can feed the credit scoring demon. Or if they ever want to re-expand the facility then perhaps it would be easier if already open. In reality, with gains/losses of interest arguably measured more appropriately in pence rather than pounds at this level of borrowing, I'm not sure it really matters unless I'm missing the point. I feel I am!
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Post by stevepn on Nov 16, 2020 14:07:21 GMT
The mortgage was originally £195,000 but has been lowered by lump sums over the years but now he says no more it's stopping at £2,000. I realise it isn't much either way but my way of thinking is why keep paying this monthly interest when you can pay it off?
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james100
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Post by james100 on Nov 16, 2020 14:27:04 GMT
Are they perhaps getting indirect benefit through having a mortgage? e.g. people used to do this ages ago to avoid paying fees for a bank to store original house deeds. (Not an issue now though since LR has computerised most of it) or does it count as a direct debit for a "special" bank account with preferential interest rate?
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adrianc
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Post by adrianc on Nov 16, 2020 15:28:05 GMT
I'd suspect it's the "But the bank store the deeds for free" trope, too.
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jonno
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nil satis nisi optimum
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Post by jonno on Nov 16, 2020 15:30:39 GMT
I have a relative who has an interest only mortgage of about £2,000. I keep telling him to pay it off but he says it is better to keep it going. Is he correct? Why not ask him and test his rational back here ( eg if there is a redemption fee it might make sense)
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Post by stevepn on Nov 17, 2020 14:50:28 GMT
Thanks for the replies. I did ask him and all he said was"let it be, let it be".
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jonno
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nil satis nisi optimum
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Post by jonno on Nov 17, 2020 14:59:15 GMT
Thanks for the replies. I did ask him and all he said was"let it be, let it be". Oh well, when I find myself in times of trouble........................................... 
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travolta
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Post by travolta on Nov 17, 2020 16:31:01 GMT
Thanks for the replies. I did ask him and all he said was"let it be, let it be". Well, there y'go. He's a Beatles Fan . All explained.
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adrianc
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Post by adrianc on Nov 17, 2020 17:38:26 GMT
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Post by Deleted on Nov 18, 2020 15:49:13 GMT
I have a step niece who does the same thing, she believes that she may never be able to get another mortgage so she wants to keep this one alive as long as possible to retain the "right" to another. So it seems odd to me but if she needs to suddenly borrow more money she would actually increase her mortgage.
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keitha
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Post by keitha on Nov 18, 2020 18:04:37 GMT
I have a friend in a similar position, it appears he agreed some time ago that when he paid the mortgage off he would pay his ex wife £100,000 by taking a new mortgage ( as part of a divorce settlement ).
So as long as he keeps the mortgage he doesn't have to pay her, he is basically saving up to have the £100K to pay hr rather than be in debt.
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Post by stevepn on Nov 22, 2020 13:46:00 GMT
I have a step niece who does the same thing, she believes that she may never be able to get another mortgage so she wants to keep this one alive as long as possible to retain the "right" to another. So it seems odd to me but if she needs to suddenly borrow more money she would actually increase her mortgage.
Yes thinking about it this seems his reason.
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