Should I pay off my mortgage completely?

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Brandon
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Joined: Fri Jun 28, 2019 2:56 pm

Should I pay off my mortgage completely?

Postby Brandon » Fri Jun 28, 2019 2:58 pm

Hi, at the moment I have around $120k remaining on my mortgage but I also have $120k plus sitting in a mortgage interest saver account (offset). I have no interest to pay so I can just let it sit their indefinitely if I wanted to. I pay a small yearly fee for the loan account and offset facilities. So, I’m trying to determine whether or not I should pay it off. What are the pros and cons of doing so?

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Otto Dargan
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Re: Should I pay off my mortgage completely?

Postby Otto Dargan » Fri Jun 28, 2019 4:18 pm

Hello Brandon. Welcome to the forums.

It is a great position to be in when you don’t have any interest to pay on your mortgage. Well done.

Now, let’s look at the pros and cons of paying off your mortgage completely:
The pros:

  • The foremost benefit to not paying off your mortgage completely is easy access to funds you can use renovate and improve the value of your property, invest in another property or shares, take advantage of sudden market movements etc.
  • A home loan is one of the cheapest credit you can get compared to credit cards, personal or business loans etc. so it makes sense to keep it open.
  • The interest you pay on your investment loans is tax deductible.
  • You don’t have to worry about the safekeeping of the property title as it’s secured safely with the bank.

Now that we’ve looked at the pros let’s carefully consider the cons as well:
  • You’ll have mortgage repayments to meet so if some unforeseen event changes your financial position you may not be able to meet your mortgage repayment.
  • You’ll pay more in interest over the life of the loan.
  • There may be yearly fees associated with your home loan,offset facilities and/or redraw facilities and penalties if you make extra repayments.
  • Some borrowers may be tempted to use the equity and redraw on their home loans.
  • The property title stays with the bank.

Ultimately, your best path forward will depend on your financial goals, risk appetite, age and retirement plans.

We specialise in home equity loans.

Give us a call on 1300 889 743 or fill in our free assessment form to discuss your situation.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Brandon
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Joined: Fri Jun 28, 2019 2:56 pm

Re: Should I pay off my mortgage completely?

Postby Brandon » Fri Jun 28, 2019 4:39 pm

Nice. So, how do you recommend that I do this? I’ve heard that some borrowers pay off most of the mortgage and keep a small mortgage balance and change to interest only. How does that work?

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Otto Dargan
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Re: Should I pay off my mortgage completely?

Postby Otto Dargan » Fri Jun 28, 2019 6:33 pm

Hi Brandon,

Some financially savvy borrowers pay off most of the mortgage and keep a small balance of say $500 and switch to interest only repayment. This way you avoid having your home loan account closed automatically.

Whether or not this is suitable for you will depend on how financially savvy you are. If you’re not it may be better off simply paying off the mortgage completely and closing your home loan account.

We recommend consulting a qualified financial advisor to discuss your financial needs and plans.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Brandon
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Joined: Fri Jun 28, 2019 2:56 pm

Re: Should I pay off my mortgage completely?

Postby Brandon » Fri Jun 28, 2019 7:08 pm

Alright. If I do decide to pay off my mortgage, what else needs to happen so I can get my property title back and remove the bank from the title?

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Otto Dargan
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Joined: Sat Sep 06, 2008 5:55 pm
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Re: Should I pay off my mortgage completely?

Postby Otto Dargan » Fri Jun 28, 2019 7:15 pm

Hi Brandon,

Once you’ve paid off the entire home loan balance you can apply to have the bank removed from the property title. You’ll need to fill in your lenders’ mortgage discharge form, fill in all your details and submit it to the lender directly or through a solicitor or conveyancer who’ll ensure the title is transferred to you. Typically, lenders charge a $350 mortgage discharge fee and a $200 fee for the government to have the bank’s name removed from the title. Once that’s completed, you’ll receive your title back.

Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for a home loan.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts


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