Remortgaging for additional funds to invest

katy123

Hi

We took out a 5 year fix 3 years ago at 5% and I have noticed that rates have fallen to around 4% now. I have ran the maths and it makes sense to remortgage to get a better deal. Our mortgage is currently £150k but i know we can get a mortgage of £187,500 due to recent house price rises in our area. I want to extract the additional equity £37,500 and simply use it to top up ISA's for this/next tax year. As this is our first re-mortgage, I'm guessing on the application, we will be asked why/how we intend to use the additional borrowing? Is this correct? As it won't be for home improvement purposes, will we still be granted a remortgage or do they not ask you? Many thanks.

Dave_the_Ginger_Cat

What's your ltv?

Thrugelmir

There's no logic in withdrawing equity and paying interest at 4% while receiving considerably less from putting it on deposit. Something lenders would see straight through. Though whether they will grant your request is highly questionable. As purpose of funds needs to be clear.

kingstreet

Have you noticed if there's a penalty to repay your fixed rate early?

Combine that with the lousy ISA returns and this plan makes little sense, sorry.

suze369

Have you found savings rates which will pay higher than the 4% interest you will pay on the loan?

I know people have done this to buy shares in the past. but as I read it you will borrow money and pay 4% interest and invest it elsewhere at a lower amount based on current isa rates that i can see. Effectively paying out in interest than you will earn

amnblog

Anybody that helped you do this (lender or broker) would be in the firing line when you decided it was a bad idea at a later date.

katy123

LTV will be 80% on the remortgage, I was referring to a S&S ISA:).......

We have savings already in S&S ISA of 100k plus so we are trying to gear up with sufficient buffer in case things go wrong. Just need know how best to approach the remortgage.

jaybeetoo

katy123 wrote: »

LTV will be 80% on the remortgage, I was referring to a S&S ISA:).......

We have savings already in S&S ISA of 100k plus so we are trying to gear up with sufficient buffer in case things go wrong. Just need know how best to approach the remortgage.

Have you considered the risk of what you are planning?

Gearing works both ways - it can increase your gains but it can also increase your losses.

katy123

jaybeetoo wrote: »

Have you considered the risk of what you are planning?

Gearing works both ways - it can increase your gains but it can also increase your losses.

We certainly have, thank you.

Thrugelmir

katy123 wrote: »

We have savings already in S&S ISA of 100k plus so we are trying to gear up with sufficient buffer in case things go wrong. Just need know how best to approach the remortgage.

Be prepared for a thorough investigation of your finances.

Don't expect investment in S&S to be an acceptable use of equity.

katy123

Thrugelmir wrote: »

Be prepared for a thorough investigation of your finances.

Don't expect investment in S&S to be an acceptable use of equity.

We'll probably re-think our strategy then if it's not acceptable and opt for holidays and cars .....how about about a deposit for a BTL.