Lending more than we want

jackieblue

Hi,
Not to go into all the background, we applied for additional borrowing towards our current mortgage deal coming to an end. We applied for much more than we now need, as we have released funds from elswhere. (We were looking for a deposit on an overseas property.)

Apparently the original larger amount was approved and offered and is sitting there waiting for us to take it. I called the BS and said we no longer wanted that large amount. I was advised that the rates (2 yr fixed) had now gone up but that my offer was still valid at the original rate.

I have been advised that I could continue with this original large amount, but only ask for some of it to be paid now with the rest sitting waiting for me to take it when we want it. There would be no charges, no costs whatsoever for whatever portion of the money we don't take and no extra charges when we do take any more.

This sounds brilliant but is there anything we need to be aware of. I think it's a good fixed rate and it seems too good to be true. They haven't called it a reserve facility of drawdown or anything at all.

Please let me know if this is not a good idea. I don't usually get the feeling I've done something right with a BS and am worried we are missing something ?

Thanks in advance.

Joe_Bloggs

How much and at what rate ? Are there early repayment conditions ? Can you say who you are dealing with. It all sounds strange.
J_B.

MortgageMamma

Hi there

Seems pretty straightforward to me. This is a drawdown/flexible mortgage. It simply means that the lender has allocated you x amount that sits on top of your existing mortgage, you can draw on it when you want to, and until you do you dont have to pay for it.

Who is your lender? Have you taken professional advice? If they have not explained it clearly enough, go back, and ask them to explain again until you understand what they are offering. They are right in saying fixed rates have gone up, and dependent upon your circumstances and other conditions of the mortgage it could well be the best option to take this mortgage at a lower rate.

HTH

MM

Joe_Bloggs

@Mortgagemamma, I am the one who is confused. Having read both descriptions of the facility I now understand. I thankyou both.
J_B.

jackieblue

Mortgage Mama - many thanks for your reply.
Joe Bloogs - it might be the way I put it that lead to the confusion.

It's with Halifax on a 2 yr fix at 4.89%. There is a product fee and reservation fee (these get me), but being a remortgage there's no valuation or solicitor's fees to pay. It may not be the best rate, but apparently since I applied their rate for this product has gone up by 0.4%.

I didn't get professional advice because a) we sort of fell out with our financial adviser and b) I was wanting to stay with the same provider for the fees and the ease.

I don't feel that I don't trust them at all. It's just that I had never heard of applying to borrow more just to keep it on hand for as long as I want. If it's that easy and cheap, why doesn't everybody do this and use it for other purchases or loans which could cost a lot more ? Perhaps they do and I'm just late hearing about it.

Anyway MM, you have given me reassurance. When I receive the paperwork I'll contact them if there is anything I am unsure about. Nothing previously mentioned not having to take all that was agreed.

Thanks again.

jackieblue

Just wanted to update you both really. I phoned today to say I would like to take half of the amount agreed and keep the rest "on reserve".

I was told this was not the kind of mortgage that had been arranged and although it showed in the file records that this is what I had been told, that person had made a mistake.

I knew it was too good to be true - back to the drawing board.