Mortgage advice . . Does anyone know anything about Paying a Mortgage off in full early?

19
Found 17th Sep 2008
. I have been advised to leave a £1.00 on the Mortgage if I pay the rest off ?

Does anyone know what this £1 is for ?
& also any other info appreciated ..

Thanks in advance.

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19 Comments

Early repayment charge i think
Hence if you leave a pound you shouldnt get charged.
Im just going on assumptions so dont take my word for it,.

I don't know about all of the companies, but at least one has a 'deal' where you leave £150 , pay nothing ever again and they keep the deeds guaranteed safe and sound for you - til you want them out.


The £150 was a bit back; it may be £1 now!!

When I worked for a mortage company, I believe some people did this to avoid paying the sealing fee (basically a fee for the documents being legally stamped saying mortgage is all clear) as this was in the region of £125 with some lenders. Ours at the time was £90, but they may have reduced them since then as this was about 3 years ago.

Hi,

Have a look at your mortgage paperwork. Some mortgages have penalities if you pay it off early say 10% in 1st year, 7% in 2nd year and then no penalty after 5 years.

Never heard of keeping £1 as your mortgage though, sounds bonkers!

It might be because there is a large termination fee. By leaving the £1 you can avoiding paying this (but still pay interest on the £1). I paid off a mortgage last year simply by transferring funds directly from a savings account and I got all the documentation in the post within a couple of weeks (Nationwide).

One thing. Check the final balance carefully to ensure that in includes any recent payment.

The idea is keep the account open , then you can borrow in the future on an open account at mortgage rate which will be the best loan rate.
For example if in 5years time you want to buy a new car or have an extention built you can borrow on the current mortgage rate.
NEVER CLOSE YOUR MORTGAGE ACCOUNT!!!!

Yes my parents paid there mortgage of with a redundancy payment nearly 15 years ago apart from £1 of it because of an early payment fee which for them is £500, next year when the 25 years are up they will pay the £1 plus the small amount of interest owed on that and they are free of the mortgage and the hefty early repayment fee.

My parents-in-law were advised to leave £1 on their mortgage so that the deeds would be stored at the bank for free, if you pay everything off they charge you to store the deeds as do solictors etc

Original Poster

Thanks everyone for your very helpful replys .....
BTW It is with the Nationwide
Thanks to TISCALI my phone is 'down' again so I cant call them !

If you are selling your house you will have to pay the mortgage off in full - the £1 retainer only applies as indicated above where people are paying off the mortgage but staying to avoid the admin fee etc

The £1 also means that the bank stores your deeds for you securely, rather than you having to pay for secured storage yourself.

A few points to note

-Redemption penalty wouldnt be avoided by simply keeping £1 in the account
-Most lenders no longer keep the deeds in materialised form so the deeds were most likely sent to you or to your solicitor
-Charlie & Lola's post seems to be the most sensical reason why one would keep an outstanding balance BUT that probably only applies if you no longer need financing as any refinancing wouldnt take place without the previous lender releasing its security over the property
-Along the lines of point 3 above, keep in mind that the lender will keep its security over your property even if the outstanding balance is £1 (which is ludicrous)

Please make sure you obtain proper professional advice. Wrong decision can have dire consequences...

Original Poster

Cheers again for all your help :thumbsup:

tangoed66;2989847

My parents-in-law were advised to leave £1 on their mortgage so that the … My parents-in-law were advised to leave £1 on their mortgage so that the deeds would be stored at the bank for free, if you pay everything off they charge you to store the deeds as do solictors etc



you are absolutely right, used to work for a large building society 3 years ago and this the reason why you leave £1 on the mortgage

My husband used to be a mortgage advisor and I asked this very question. Apparently, even if you just leave £1 on the mortgage, the companies have changed it now so you still have to pay the fee, this used to be a way of getting out of it.

However, I'm sure that it still applies that if you leave £1 on your mortgage then the company keep hold of you Deeds for you which saves you the cost of having to put them in your Bank's safe custody for safe keeping. I could be wrong, but I'm sure this is why my husband says people leave £1 on their mortgage nowadays as until you have paid every last penny off the mortgage company still own that amount (so a pound) and therefore are still legally entitled to keep your Deeds, hence saving you money.

Hope this helps (and I'm right!!).

Banned

Yep, i have never heard of any company not charging the early repayment fee if you leave £1 on
Its to keep the deeds in safekeeping.

People may feel more "comfortable " with paper deeds but they are not worth .....well the paper they are written on !
All deeds are now kept "electronicaly " now and this is what any deal ....dispute or court case will be settled with, the paper is only a reference. so it don't really matter where it is kept.
I will say again the reason to keep a £1, and keep account open
You’ll find that mortgages offer you perhaps the cheapest way to borrow. Mortgage loans offer low interest rates because you post the house as collateral:
The lender is happy to keep the account open so you go back to them for the further loan in the future.

Thanks for all the info folks...never realised the thing about the £1

all wrong (well, nearly)

Mortgage Account Fees are now aroung £225 and are mainly paid at the end of a mortgage to cover admin costs (mortgage statements, account letters etc)

Your deeds are all electronic now so you should have received your paper deeds back from your mortgage provider by now.

rangermastiffs - you will never be able to borrow on the same rate as your mortgage unless you have a flexible mortgage that you paid off before the redemption date. other that this, you are looking at anywhere between 6.5% and 7.5% for additional lending. if you have paid off your mortgage in full, then you would be eligible for a remortgage rate, which although has a booking fee, will have a free valuation and free legals and should attract a lower rate than additional lending

early repayment charges (ERCs)happen when you pay over a set amount while you are in an existing "deal" like a three year fixed rate, or a two year tracker. although flexible mortgages should have no ERCs
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