PPoR - Paying off vs small mortgage

Discussion in 'Financial Planning' started by devank, 30th May, 2020.

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  1. devank

    devank Well-Known Member

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    What are the pros & cons of paying off your home's mortgage instead of having funds in redraw? (mainly from a retired person's point of view)

    Pros:
    1. No need to do worry about admin work. Eg: Moving funds
    2. Money in the redraw isn't really yours. If you pay it off, then nobody can 'steal' it from you.
    3. Feeling that, your home is actually yours.

    Cons:
    1. Asset protection. I remember @Terry_w was talking about leaving the titles with the bank is better than having it with you.
    a. The title is safely kept at the bank
    b. Any title search would show that the house it under a mortgage, but nobody would know how much. Less chance of suing you.
    2. Emergency money: Since you can't qualify for new loans, this is one way to have access to large amount of money.

    Are my above statements correct?
    What are the other Pros & Cons of paying off a mortgage?
     
  2. Trainee

    Trainee Well-Known Member

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    This is wrong. Money in the redraw isn't a bank deposit. It's basically a credit card limit.

    Say you have a credit with a $2000 limit. You close the credit card. Have you lost anything? You've lost access to that $2000, but you haven't lost any money.
     
  3. ShireBoy

    ShireBoy Well-Known Member

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    This is also a con.
     
  4. Trainee

    Trainee Well-Known Member

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    This is exactly the situation with me bank recently. They closed off a loan redraw. But if you pay the loan off, that's exactly the same result.
     
  5. devank

    devank Well-Known Member

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    Yes. I'm thinking of online theft.
    Same with CC fraud as well.
     
  6. Trainee

    Trainee Well-Known Member

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    Thats a bit out there. If there is risk of online theft from a redraw, there is the same risk with a bank account. Then what will you do?
     
  7. Mark F

    Mark F Well-Known Member

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    How much is it costing you in ongoing fees to keep the mortgage?
     
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  8. Trainee

    Trainee Well-Known Member

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    Other than feeling good, dont see the advantage of paying off the mortgage. Fully offset would be even better.
     
  9. devank

    devank Well-Known Member

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    I'm guessing under $400. That's the fee for the 'professional package' generally. Interest on the net balance would be around $400 as well.