Monday, April 30, 2018

To remortgage or not?

The last payment on one of my mortgages is due to be paid in June this year. The net cost of borrowing is currently around 2.3% which compares favourably with the margin facility currently costing about 2.9% (and compounding monthly), the yield on good quality short term bonds at around 4-5% and there are many equities which offer yields above 4%.

The other factor in favour of taking out a new mortgage is that the only storage space available for the title deeds is a filing cabinet at home – there is no room in my safe deposit box. I understand that lost title deeds cannot be replaced effectively making the property unsellable and unmortgageable. Taking out a new mortgage mitigates that risk.

The negatives are (i) the interest rate is a floating rate and will cost me more as interest rates rise and (ii) it's a P+I mortgage which will have an impact on cash flow. That said, it's a small property and the mortgage will be correspondingly small.

I'm currently inclined to take out a mortgage for a relatively small amount ... assuming the bank will lend to someone with no employment income.

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