Mortgage - pay it off early?


M

me

I'm in the happy position of being able to pay off my mortgage. The
question is, what would happen to the deeds and endowments if I did this?
Would I be better off paying it off entirely or leaving a small balance on
the account, so that the Building Society would keep the deeds?

The mortgage is with a UK Building Society, has no redemption penalties, is
endowment backed and has 9 years left to run.

Any opinions?

Thanks

Huw Francis
 
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T

tim

me said:
I'm in the happy position of being able to pay off my mortgage. The
question is, what would happen to the deeds
You'de get them back so you'll have to find somewhere safe to
keep them. It's best to leave a pound on the mortgage and let the
compay keep them in their strongroom.
and endowments if I did this?
Would I be better off paying it off entirely or leaving a small balance on
the account, so that the Building Society would keep the deeds?
Yep.

tim
 
R

Ronald Raygun

me said:
I'm in the happy position of being able to pay off my mortgage. The
question is, what would happen to the deeds and endowments if I did this?
It used to be considered clever to leave a small balance outstanding,
so that they would keep the deeds safe for you more or less free of
charge, you'd simply pay an trivial amount of interest instead. Some
lenders don't like beng taken advantage of like this, and have imposed
limits to how small a balance they are prepared to entertain. So leaving
a pound outstanding and paying 6 or 7 p interest per year is just not on,
and typically you'd have to leave one or two grand in.

But since most land is now registered, deeds (for most properties) no
longer have any intrinsic value, except as a curiosity. If they are
lost, nobody cares.

As for the endowments, they don't really have anything to do with the
property. Some lenders used to require endowments to be assigned to
them (and the documents kept in their custody) and would consequently
rescind the assignment and release the documents once the loan is repaid.
However, the endowment, unless you specifically cash it in early (which
is unlikely to be a terribly good idea), or make it paid-up, will just
keep going, so you'd just keep paying the premiums, and get a cash lump
sum in 9 years' time.
Would I be better off paying it off entirely or leaving a small balance on
the account, so that the Building Society would keep the deeds?
No. Yes. Maybe.
 
J

john boyle

Ronald said:
But since most land is now registered, deeds (for most properties) no
longer have any intrinsic value, except as a curiosity. If they are
lost, nobody cares.
But many mortgaged properties are more likely to not be registered
because they were bought years ago and AFAIAA an unregistered property
does not to be registered on redemption.
As for the endowments, they don't really have anything to do with the
property. Some lenders used to require endowments to be assigned to
them (and the documents kept in their custody) and would consequently
rescind the assignment and release the documents once the loan is repaid.
However, the endowment, unless you specifically cash it in early (which
is unlikely to be a terribly good idea)
Why do you say this?
 
R

Ronald Raygun

john said:
But many mortgaged properties are more likely to not be registered
because they were bought years ago and AFAIAA an unregistered property
does not to be registered on redemption.
Sure. But even then, loss of deeds is typically just a minor inconvenience.
Often, deeds are stored with solicitors. Their premises are hardly
immune to damage by flood or fire, and even lenders' storage facilities
could be less than 100% secure.
Why do you say this?
Because doing so tends to involve you in a loss you would not sustain if
you were to hang in there until maturity. Fair enough, hanging on might
involve you in a loss you would not sustain if you cashed in early, e.g.
if future performance (between now and maturity) is going to be abysmal.

One needs to weigh the pros and cons, and I guess that many endowments
have invested in funds which haven't done particularly well of late, but
who's to say that trend will continue? You might well do much better by
leaving the dosh where it is than by extracting it, taking a surrender
charge and/or MVA on the chin, and DIY investing the proceeds elsewhere.

I was careful to leave myself an escape route. I only said "unlikely to
be terribly good". That doesn't mean it has to be really bad, it can
still be good, just not always very good. OK?
 
M

Mike Scott

me said:
I'm in the happy position of being able to pay off my mortgage. The
question is, what would happen to the deeds and endowments if I did this?
Would I be better off paying it off entirely or leaving a small balance on
the account, so that the Building Society would keep the deeds?

The mortgage is with a UK Building Society, has no redemption penalties, is
endowment backed and has 9 years left to run.

Any opinions?
Pay it off, buy a fireproof document box from the huge savings if you
feel it's necessary for peace of mind to keep the paperwork in. You
should get back the endowment policy and a release letter from the bank
- send a copy of the letter to your endowment co. to keep their records
straight.
 
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M

Mike Scott

Ronald Raygun wrote:
....
Because doing so tends to involve you in a loss you would not sustain if
you were to hang in there until maturity. Fair enough, hanging on might
involve you in a loss you would not sustain if you cashed in early, e.g.
if future performance (between now and maturity) is going to be abysmal.

One needs to weigh the pros and cons, and I guess that many endowments
have invested in funds which haven't done particularly well of late, but
who's to say that trend will continue? You might well do much better by
leaving the dosh where it is than by extracting it, taking a surrender
charge and/or MVA on the chin, and DIY investing the proceeds elsewhere.

I was careful to leave myself an escape route. I only said "unlikely to
be terribly good". That doesn't mean it has to be really bad, it can
still be good, just not always very good. OK?
My own endowment policies (which matured this year) were making an
effective loss - 0% return over the past couple of years. But it was
worth hanging on anyway. Check carefully before deciding to sell the
policy or redeem it early.
 
J

john boyle

For some reason the post below did not appear on my ISP so I am
answering it by snipping from Mike's reply

'Tends' ? No. More the opposite I would say.

Er, yes!. The stock market has been a a good run for a couple of years
now. If a managed life equity fund isnt showing recovery now then it
never will. Most non with profit unitised life funds are of the
'managed' or 'balanced' variety which sanitises its exposure to the
market anyway.

If its a With Profit fund then current low bonus rates are likely to
continue especially as the FSA has forced LifeCos to divest huge wodges
of their equities (thereby denying them the ability to enjoy the
market's rally) and replace them with Gilts (which, by chance, the Govt
needs to issue more of to fund its overspending).

After charges and taking into account that most life offices arent very
good at managing dosh, then a life fund just isnt the place to be.
Well I am glad you have toned it down a bit in your explanation.

I think the phrase ''Likely to be a good idea' will make you right more
times than your original will.
 
R

Ronald Raygun

john said:
For some reason the post below did not appear on my ISP so I am
answering it by snipping from Mike's reply
Perhaps your fly-by-night ISP is not as good as my fly-by-night ISP.
'Tends' ? No. More the opposite I would say.
Not sure what you're trying to say here, old bean. What's the
opposite of "tends"?

What I meant was that cashing in involves a "penalty" loss, i.e.
you get back less than it's worth if you surrender the endowment
to the provider. You also get back less than it's worth if you
sell it (assuming someone wants to buy it). These losses you would
not incur if you were to hang on (but you might incur different
losses instead, as I went on to say).
Er, yes!. The stock market has been a a good run for a couple of years
now. If a managed life equity fund isnt showing recovery now then it
never will. Most non with profit unitised life funds are of the
'managed' or 'balanced' variety which sanitises its exposure to the
market anyway.

If its a With Profit fund then current low bonus rates are likely to
continue especially as the FSA has forced LifeCos to divest huge wodges
of their equities (thereby denying them the ability to enjoy the
market's rally) and replace them with Gilts (which, by chance, the Govt
needs to issue more of to fund its overspending).

After charges and taking into account that most life offices arent very
good at managing dosh, then a life fund just isnt the place to be.


Agreed.
There we are then.
Well I am glad you have toned it down a bit in your explanation.

I think the phrase ''Likely to be a good idea' will make you right more
times than your original will.
But I meant "likely *not* to be a good idea" !! And you agreed !!
 
J

john boyle

Ronald said:
Perhaps your fly-by-night ISP is not as good as my fly-by-night ISP.
But I bet my fly by night ISP is worse than YOUR fly by night ISP!! So
there!
Not sure what you're trying to say here, old bean. What's the
opposite of "tends"?
How about "Does not tend"?
What I meant was that cashing in involves a "penalty" loss, i.e.
you get back less than it's worth if you surrender the endowment
to the provider.
Hmm, 'less than its worth'.

That can only apply to a with profit fund not a managed collective fund.
So that excludes a huge wodge of endowments. In your original post you
referred to

Generally MVAs dont apply to endowments, usually just to 'with profit
bonds'. The same effect is achieved though by reducing the 'terminal
bonus' which is arbitrary anyway and cant be included in current
'worth'.

You seemd to be confusing 'with profit' funds and 'managed' funds.

You also get back less than it's worth if you
sell it (assuming someone wants to buy it).
Eh? Its worth what you can get for it.
These losses you would
not incur
if you were to hang on
Yes they could.
(but you might incur different
losses instead, as I went on to say).
Accepted.
 
R

Ronald Raygun

john said:
But I bet my fly by night ISP is worse than YOUR fly by night ISP!! So
there!
Yes, that's what I just said. "Not as good as" = "worse than".
So what's with the "but"?
Hmm, 'less than its worth'.

The same effect is achieved though by reducing the 'terminal
bonus' which is arbitrary anyway and cant be included in current
'worth'.
Of course it can. Well, OK, it depends how you define current
worth, which I like to do in terms of likely maturity value scaled
back by the likely growth rate, applied to the remaining period.

So even if you can take the money out now and invest it elsewhere
at the same growth rate, you will end up with less than you would
if you left it to mature as planned. Thus the decision to abort
involves a loss which would not otherwise occur.
You seemd to be confusing 'with profit' funds and 'managed' funds.
No, but admittedly I was focusing on WP.
Eh? Its worth what you can get for it.
Again, focusing on WP. At the end of the day (well, the term), it's
worth to a buyer what it would have been worth to you. The buyer
wants to make a profit. Their gain in the your loss. So they
pay you a bit more than the company would for surrendering, but a
bit less than it's "really" worth, the "real" value unfortunately
being incapable of being realised.
Yes they could.
That does not compute. Who or what is "they" and what could they do?
 
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T

Terry Harper

Generally MVAs dont apply to endowments, usually just to 'with profit
bonds'. The same effect is achieved though by reducing the 'terminal
bonus' which is arbitrary anyway and cant be included in current
'worth'.

You seemd to be confusing 'with profit' funds and 'managed' funds.
I think that if you study the T&Cs of any unit fund, there is a
proviso that payment can be delayed, or the bid price be lowered, if
there is a sudden high demand for redemptions.

It's similar to an MVA and I think I've seen it described as such
somewhere.
 
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T

tim

Ronald Raygun said:
It used to be considered clever to leave a small balance outstanding,
so that they would keep the deeds safe for you more or less free of
charge, you'd simply pay an trivial amount of interest instead. Some
lenders don't like beng taken advantage of like this, and have imposed
limits to how small a balance they are prepared to entertain. So leaving
a pound outstanding and paying 6 or 7 p interest per year is just not on,
and typically you'd have to leave one or two grand in.
Oh well, one to the NW then. They had no problem with this
idea, they suggested it before I asked for it and they don't even
chage me any interest (they could be rolling it up).

They still have my house insurance though, but as I own a
flat, it is contents only so they take 12 quid a month from me
and send me statement each year, I must run at a loss.

tim
 

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