MR Chas a mortgage that is coming to the end of its term. He has a cash lump sum and is wondering about "the advantages and disadvantages of keeping it going as against clearing it i.e. the real cost of the mortgage versus using the cash for investment. With declining tax relief in the coming years, are there any tax advantages to clearing it this year?"

Our low inflation, low interest rate economy is the perfect incentive for anyone with cash to spare to pay off their debts. Our reader hasn't furnished us with any details, but if his mortgage has five years or less to run, chances are he is paying off mainly capital and only a tiny amount of interest. The tax relief on that interest payment is insignificant and shouldn't have any impact on his decision to clear the loan.

Mr C should check with his lender to see how much capital is remaining to pay off. By using part or all of his lump sum to pays off the remaining loan now, he will be avoiding any remaining interest, thus making a savings.

Mortgage interest rates may be low now, but at about 7 per cent APR, are still a few percentage points higher than the best gross fixed deposit rates available. Paying off a mortgage early not only eliminates this relatively expensive debt, but significantly increases monthly cash flow.