Changed circumstances - will they change my % rate?

destry

I have an offset mortgage with a low interest rate (tied to bank base rate) and a fair bit of unused borrowing. The LTV is very low - about 10% of actual borrowing and 20% of available borrowing - as the house has gone up in value so much over the 17 years I have owned it.

A few years ago I lost my job and have been supporting myself since doing bits and pieces of freelance work. My income is much lower and probably wouldn't support the total borrowing on the offset mortgage. I never told the bank about my change in circumstances. I have never missed a mortgage payment.

I now want to use the available borrowing to do a buy to let. If I start spending the available borrowing, will the bank query it, find out about my changed circumstances and withdraw the unspent borrowing? I don't want to commit to buy at auction, for instance, only to find that they won't release the money...

Worse, do you think they might also change the terms of my existing borrowing -- taking the opportunity to put me on a higher rate on the grounds that I should have told them about my change and didn't, thereby invalidating the old contract between us?

Thoughts welcome!

Jenniefour

Not sure how using the unspent amount on the mortgage to buy a BTL is going to resolve your present financial situation since you will then have a much bigger monthly amount to pay on your own mortgage - this is simply moving money about, with the costs of buying on top. And it looks likely interest rates will start rising in the not too distant future. Are there other ways of solving this problem - like downsizing to a property with no mortgage or getting a lodger?

Wh05apk

As you already have the limit agreed, then it should not be an issure re-drawing the funds provided the purpose is within their criteria.

You may also wish to check that the limit is still there, I know Woolwich reduced/cancelled a lot of limits a couple of years ago, if yours has been cancelled, then you would need to re-apply meeting current criteria.

If you go ahead with it, don't forget to offset the interest cost against profits to reduce your tax.

destry

Jenniefour wrote: »

Not sure how using the unspent amount on the mortgage to buy a BTL is going to resolve your present financial situation since you will then have a much bigger monthly amount to pay on your own mortgage - this is simply moving money about, with the costs of buying on top. And it looks likely interest rates will start rising in the not too distant future. Are there other ways of solving this problem - like downsizing to a property with no mortgage or getting a lodger?

Thanks for the concern, but I'm not sure what problem you are referring to here? I want to do a buy to let and the cheapest borrowing I can get by a country mile is the unused amount on my offset mortgage. I was just asking if anyone had any experience of trying to draw down a significant amount of unused borrowing and being refused -- e.g. because of a failure to inform the bank of a change of circumstances.

destry

Thanks, WH05apk, that's a good thought! I'll dig out the small print...

getmore4less

Wh05apk wrote: »

As you already have the limit agreed, then it should not be an issure re-drawing the funds provided the purpose is within their criteria.

You may also wish to check that the limit is still there, I know Woolwich reduced/cancelled a lot of limits a couple of years ago, if yours has been cancelled, then you would need to re-apply meeting current criteria.

If you go ahead with it, don't forget to offset the interest cost against profits to reduce your tax.

I know they did this for normal non offset reserves
My offset reserve was not touched when they made that change.

getmore4less

destry wrote: »

Thanks for the concern, but I'm not sure what problem you are referring to here? I want to do a buy to let and the cheapest borrowing I can get by a country mile is the unused amount on my offset mortgage. I was just asking if anyone had any experience of trying to draw down a significant amount of unused borrowing and being refused -- e.g. because of a failure to inform the bank of a change of circumstances.

My offset I have been drawing down to put in savings where the rate is better, I stopped working 09 and it has not been a problem.

As long as you can access the money without having to ask your lender I can't see a problem.

You could start by getting all the funds into a single offset account where you can access quickly when needed.

michaels

If you have such a good rate should you not have drawn down the funds and put them in a top paying savings account anyway to profit on the spread?

Have you looked at investing in solar panels if you are looking for a higher return?