Should we pay off our mortgage in full?

Q Quite by accident when tidying paperwork I noticed that I have critical illness cover on the insurance for my mortgage. A year and a half ago I needed a heart bypass operation and this allowed me to claim on the policy. We have close to two years remaining of a repayment mortgage to pay. The balance is between £9,000 and £10,000.

We also have a £1,500 loan to pay off and credit card balances of between £4,000 and £5,000. We have a son at university and our combined income is £58,000 before tax.

We are due to receive a payout of around £40,000. I am 53 and I can draw a reduced pension at 55. However, it will not be enough to allow us to live comfortably (although it could be when I am 57 or 58 years old). I am a teacher and my wife is a teaching assistant.

The payout means that we will soon be in a position to repay the capital sum outstanding on the house. But we have heard that it makes sense to keep a small amount outstanding on the mortgage. Is this true? RH

A In the past, the reason for keeping a small amount of, say £1,000, outstanding on a mortgage was so that the lender would carry on holding the mortgaged property’s “title deeds” in safe keeping. It also meant that borrowers would avoid paying the lender an administration fee for returning the title deeds when the mortgage was paid off completely. This fee – also know as a redemption administration fee, deeds sealing fee, deeds fee, exit administration fee or exit fee – can cost anything between £50 and £300.

However, needing to keep the physical title deeds in a safe place is unnecessary for the 80% of properties in England and Wales that are registered with the Land Registry, as it holds registered titles in digital form.

If your house is registered with the Land Registry – you can check here – you don’t need the title deeds to be kept in a safe place because you don’t need them to prove your ownership of the property. So it’s safe to repay the whole of your mortgage and have your title deeds returned to you (assuming that your lender actually has them).

However, if your house is unregistered – which it could be if you owned it before 1990 and you haven’t mortgaged it since – you should keep your title deeds in a safe place. And you’ll need them if you choose to register your house voluntarily.

Registration of property in England and Wales is compulsory when you buy, inherit, are given, or take a mortgage out on a property. Land registration is dealt with by the Registers of Scotland in Scotland and by Land and Property Services in Northern Ireland.