Extend mortgage to fill ISAs?

Audaxer · 18 February 2018 at 10:05PM

Alex, you have done very well to get most of your mortgage paid off already, and I know from previous posts that you are extremely well set-up for the future with your pension and ISA investments. If it was me I wouldn't want the stress of increasing my mortgage to use up more ISA allowances. I would prefer to wait until I got the money, which may well be a better time to invest it if we have another bigger correction in the next few years.

As you have indicated, I'm not sure how you would explain it to the bank, or whether they would agree to increase your mortgage for that purpose.

economic · 18 February 2018 at 10:44PM

From what i understand banks wont let you release equity for things like business or investing. It usually only has to be for works to the home. If you lie about it (not saying that's what you intend to do) then you are committing mortgage fraud and they can take you to court over it.

TheShape · 18 February 2018 at 11:29PM

New kitchen, new bathroom, new central heating, double glazing. They won't be popping in to see your expensive granite worktops.

Alexland · 19 February 2018 at 7:58AM

Thanks for the further feedback. Even with the additional borrowing we are unlikely to be a highly leveraged investors. With the pensions, etc the total leverage across all our assets would still be under 15% and it would be a shame to lose the ISA allowances so I will call the bank and request the money and stay silent on how it will be used unless they ask.

Alexland · 19 February 2018 at 12:40PM

Interesting - I just called the bank, they asked what I wanted the money for, so I told them (to keep honest) it was to top up our ISAs and they flat out refused to lend for this reason. They did say they were happy to lend for a new car, home improvements, etc. Oh well we used around 2/3 of our ISA allowances this year so that's not bad I guess.

MallyGirl · 19 February 2018 at 12:46PM

I think that it was the right approach to tell the truth.
I am lucky with the offset that I never have to explain myself (and I currently only owe £80k on a £1m house)

Audaxer · 19 February 2018 at 2:36PM

Alexland wrote: »

Interesting - I just called the bank, they asked what I wanted the money for, so I told them (to keep honest) it was to top up our ISAs and they flat out refused to lend for this reason. They did say they were happy to lend for a new car, home improvements, etc. Oh well we used around 2/3 of our ISA allowances this year so that's not bad I guess.

I'm glad you told the truth as it seemed to me the right thing to do. I'm sure things will work out okay for you as the markets may well be lower by the time you receive the money to invest.

If you did have a lump sum to invest in ISAs just now, where would you invest it? I have lump sums I could invest now, but am I thinking it wouldn't make enough gains over the next 3 or 4 years to offset a 30% correction that I read has a good chance of happening within that timeframe in view of the long bull run we have been in?

Alexland · 19 February 2018 at 2:56PM

I just had a play with Zopa as they give TopCashBack with fairly low rates and they allow you to apply with "Other" as your loan reason - but that might affect the rate they offer. Even if I can get the money ISA wrapped then I might spread the investment trades over the loan repayment period as investing on credit feels pretty wrong. They seem to allow overpaying so I would plan to clear the loan within 6 months. Then next year I wouldn't have made as much in the way of ISA contributions so I would need a bigger loan, etc... where would it end....

As the markets recover from the correction I am going back to my default 70/20/10 equities, bonds and cash allocation (as I have time to ride out losses with the cash in a pension) but with loaned money in the ISAs then I would be a bit heavier on cash in those accounts too.

Alex.

economic · 19 February 2018 at 3:32PM

Audaxer wrote: »

I'm glad you told the truth as it seemed to me the right thing to do. I'm sure things will work out okay for you as the markets may well be lower by the time you receive the money to invest.

If you did have a lump sum to invest in ISAs just now, where would you invest it? I have lump sums I could invest now, but am I thinking it wouldn't make enough gains over the next 3 or 4 years to offset a 30% correction that I read has a good chance of happening within that timeframe in view of the long bull run we have been in?

Can you send a link where you read about the 30% correction? If not then who said it and what makes whoever say it qualified to suggest a 30% correction?

I do think a 30% in the next few years is likely. However that will probably follow a rise of 40-50% further from here. But this is just a guess.

ValiantSon · 19 February 2018 at 4:00PM

Alexland wrote: »

Interesting - I just called the bank, they asked what I wanted the money for, so I told them (to keep honest) it was to top up our ISAs and they flat out refused to lend for this reason. They did say they were happy to lend for a new car, home improvements, etc. Oh well we used around 2/3 of our ISA allowances this year so that's not bad I guess.

Best to have told the truth. A shame that you weren't able to go ahead with your plan, but as you say, you are getting a substantial amount in to the ISAs anyway, and there is no (even very slight) concern about rising interest rates.

It is funny that they would be happy for you to have the money for a depreciating asset like a car, however.

Extend mortgage to fill ISAs?

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