Offset Mortgage accounts

eeef

I'm about to embark a property development venture with a friend and i'm trying to work out the facts about OM accounts. I'm looking to initially release about £50k from my house to use as funds for the projects, then when it's not in use, drop it back into the pot to offset against the principle. I was planning to do this as interest only, so am I right in saying that when not in use, it would be as if i hadn't borrowed it, cost wise?
Not very well explained but hopefully someone will understand.

any recommendations on OM products?

Thrugelmir

Your first hurdle is to convince a lender to allow a release of £50k of equity. Before getting carried away with your potential venture.

eeef

I've got a bundle of equity and a 999 CR so I don't anticipate it being too tricky.

JonnyBravo

eeef wrote: »

I'm about to embark a property development venture with a friend and i'm trying to work out the facts about OM accounts. I'm looking to initially release about £50k from my house to use as funds for the projects, then when it's not in use, drop it back into the pot to offset against the principle. I was planning to do this as interest only, so am I right in saying that when not in use, it would be as if i hadn't borrowed it, cost wise?
Not very well explained but hopefully someone will understand.

any recommendations on OM products?

Yes you are correct.
I have an OM through First Direct .
Very competitive rates but you'll need a low LTV for the best rates.
Might not be a problem for you after your follow up post.

At FD you can offset multiple accounts vs the mortgage. So you could offset any savings accounts etc you keep separately too.

jamesd

You're correct, it's as if you didn't owe the money. Since projects tend to go over budget you might want to arrange a mortgage up to 65% of equity so that you have agreement that funds are available up to that if necessary, even though you don't intend to use it all. If you were to use the FD product you'd get:

A current account that is offset against the mortgage account negative balance.
A savings account that is offset against the mortgage account negative balance.
A mortgage account with a negative limit that you can pay into and take money out of.

FD has low fees and good interest rates for those with excellent credit scores and easy affordability so they are often a good first choice for situations like this.

Thrugelmir

eeef wrote: »

I've got a bundle of equity and a 999 CR so I don't anticipate it being too tricky.

The purpose of the equity withdrawl is the issue not your credit rating. You are looking for cheap finance, don't expect your lender to automatically play ball.

eeef

TBH, 'home improvements' will be all i'll tell them.