Offset Mortgage - Borrow More Than I Need?

gong_2

Hi
Interested in the very popular (judging by the talk on this forum) First Direct lifetime tracker offset remortgage. I am going for the base +0.49% (and £1098 in fees) rather than base +0.79% (fee free) as on a £140k mortgage I will have a pay back within 2 years and I am aiming to keep this mortgage probably for a long time – I am fed up of paying for fees whenever I move my mortgage every 2 or 3 years. I currently bank with FD and have been very happy with them over the years.

My question is how much should I borrow ? With my salary alone at £60k - FD will lend me £210k (even more if I include my wife’s part time income), but I only need £140k. I have no other borrowings/HP/credit cards etc. I have about £5k of cash for emergencies but this will go into the savings account and offset the mortgage. The house value is somewhere around the £400k mark so there are no problems with loan to value figures.
So as all the money is all offset, once FD give my existing mortgage provider the £140k I am left with the £70k remainder - if I borrow the £210k. This will just sit in the offset account and reduce my interest payments to a more sensible level. The money then might be used in the future (2 years - maybe 7 years – maybe never ) for a house extension.
Does this cause me any issues ( credit rating ? investor protection in banks up to £50k ? too tempting to blow it all on the horses ? ). Should I just borrow what I need now and when the time comes to do the extension then renegotiate the mortgage. But then this would involve more uneccessary fees.
The rate at base +0.5 seems so good I would be happy to have this deal until I pay it off.
What do you all think ?

Locoblade

There's no financial reason I can think of not to borrow the extra if you want it there in case you need it, but only you can answer the "will it be too tempting" question

mrsm

We did similar (but an smaller amount of extra borrowings) as we knew we had a couple of big jobs lined up on the house in the future.
As far as I can see t makes sense (so long as you're not the sort of person to blow it just because its there )
But It doesn't sit in the offset and you don't pay interest until you need it. Its just a fund you can drawn upon as and when you need it iyswim.

So our account looks like this
MOrtgage bal XXX available xxx
Additiotion borrowings bal xxx available funds xxx
Offset XXX
1st account xxx

We only pay interest on the mortgage balance + addional balance drawn (not the full amount requested) less offset savings & 1st acc


if and when you make overpayments you can pay into any account (and of cause withdraw them again at a later date

Tom_Kelly

It saves applying for it at a later date. If it won't cost you anything then it is a safety net that you put up now rather than rush to do it when it is really needed.