Extend mortgage another 88 grand at 1.25%?

Spinball

We have a Barclays offset tracker mortgage at .75% above base rate making our current mortgage 1.25%. Barclays allow us to borrow 80% of the value of our home which means that we could borrow £89k on top of our current mortgage assuming our house is worth what we think it is. There would be a £1,000 admin fee for the valuation making the actual sum available £88k. However Barclays are stopping the ability to extend the mortgage at the current rate in a few days. So we have to make a decision now whether to borrow £88k at 1.25% or not.
We could use the money because we want to develop on some land we have purchased. Even if we don't need the money immediately, we can use it to offset the mortgage and therefore not pay any interest on it. Or just buy a local property and rent it out.
The only problem is if interest rates rise significantly.
Any advice? Borrow or not? Interest rates going up significantly in the next few years or not?
Thanks in advance for any advice.

getmore4less

Check your reserve on the mortgage current account.

You can get that for free so save the valuation if there is enough it that.


£1k is a lot to recover if you dont use the money, that aside borrowing is not the issue since you could just put it in a savings account and get more interest than you would be paying or just offset it so it costs nothing.

HarrowArrow

You'll be a further 88k in debt, but I'm sure that's a risk you've factored in.

JA1000

What valuation is that based on?

Spinball

Thanks for the replies.
Reserve on the account is a fair old chunk, but if we build two houses we will need a quarter of a million.
Yes we will be a further £88k in debt, but at 1.25% it's not a horrid debt, and in fact the monthly repayment figure would still be below what we are currently over paying each month.
While we have the money, we can offset it so it costs us nothing. If interest rates go up and we haven't used it, we can repay it.
The valuation of our house is based on the 2006 value. It's somewhat generous, but we might make it. If the surveyor values it at less, we can borrow less money.
If the valuation is so low that it's not worth doing, then we'll cancel and the £1k valuation fee would also be cancelled since it is being added to the mortgage.
I am currently of the opinion that we should take it.

opinions4u

Borrow £88k.

Stick it in The AA account paying 2.8% gross (2.24% net for a basic rate taxpayer) and earn £1,971 in interest.

Pay a £1k fee plus (at 1.25%) £1,100 interest = £2,100.

So over a year you'll lose out if rates stay the same, or if rates rise and the gap between mortgage/savings rates remains the same.

Personally I can't see the point.

(As for becoming a property developer, I see nothing that will drive house prices up in a sustainable way, so would suggest that borrowing to invest in property is still not a good idea).

Spinball

opinions4u wrote: »

Borrow £88k.

Stick it in The AA account paying 2.8% gross (2.24% net for a basic rate taxpayer) and earn £1,971 in interest.

Pay a £1k fee plus (at 1.25%) £1,100 interest = £2,100.

So over a year you'll lose out if rates stay the same, or if rates rise and the gap between mortgage/savings rates remains the same.

Personally I can't see the point.

(As for becoming a property developer, I see nothing that will drive house prices up in a sustainable way, so would suggest that borrowing to invest in property is still not a good idea).

Surely buying a local property and renting it out would be profitable?