Additional borrowing and offset remortgage

bloolagoon

Probably a very simple question but I'm not financially savvy so I can't work it out.

I'm currently on a flexible mortgage 2.29 over BR. Part interest and part repayment, although we vastly overpay the IO element to the point where it's less than 20,000. We have planning permission in for a large extension that should be granted as neighbours have done similar. I have one ISA of £35,000 that ended their rate and its now at the stage where it's not worth saving but paying off mortgage for that ISA value.

However, we need approx £30,000 additional borrowing for our extension over this ISA. We are looking at an offset with First Direct for £85,000 (£55,000 remaining plus £30,000 additional).

So eventually my question. If I say asked for £100,000 to allow for slippages with the extension and have some contingency am I right in thinking it won't make any difference as the money would null out interest but give a buffer if needed. Once we know true cost of extending and fittings we can then repay any capital not needed?

I'm worried in case I've underestimated fittings and I will end up either asking for additional borrowing in 4 months time or having to pay a penalty to gain access to additional savings in fixed deals. Will they borrow money to have it sitting just in case? If they do as its offset then its interest free isnt it?

I don't think I have my head around how they fully work with offset despite reading the guides.

dimbo61

Which Lender are you with Now? First Direct!
LTV ? Equity? Income, Age,Kids? etc all come into account

bloolagoon

Thank you for replying. Affordability isn't an issue, less than 1x income with no outgoings and less than 40% LTV. The issue is I don't know for sure exactly how much the extension will cost as haven't decided on fixtures and fittings (exact kitchen). I was therefore thinking if I applied for more than I need and kept it in the offset account it would give me a buffer. The alternative is to risk breaking in to savings locked in deals and pay penalties.

If I borrowed this buffer it would mean until the 2nd build instalment is paid there will be more money in than drawn out. I tried to ring them but they just kept pushing for a full interview which I don't want to do until I know the amount to borrow, they didn't want to answer any questions without doing a DIP. Maybe I should try again and see if I get someone else?

Thrugelmir

If I was you I would use the ISA savings to overpay the mortgage immediately.

Cost the building work as far you practically can. Obtain quotes etc. Then apply for the mortgage that's required.

At the moment you don't know what you are asking for. Drawing up plans, finding a builder, ordering kitchens etc will all take time.

From the sounds of it obtaining the mortgage isn't going to be issue for you.

bloolagoon

Thrugelmir wrote: »

If I was you I would use the ISA savings to overpay the mortgage immediately.

Cost the building work as far you practically can. Obtain quotes etc. Then apply for the mortgage that's required.

At the moment you don't know what you are asking for. Drawing up plans, finding a builder, ordering kitchens etc will all take time.

From the sounds of it obtaining the mortgage isn't going to be issue for you.

We've got plans and quotes. I know the build cost just not the fixtures and fittings. I just didn't know if I could borrow some now then some later if it escalated without the rigmarole of another full application as FD treat each advance as a new application.

My logic was if it was offset and sat there once drawn down I would be net so no loss therefore adding more now at borrowing and paying off any left over wouldn't cause any cost.

Does that logic make sense or is it wrong?

Thrugelmir

bloolagoon wrote: »

Does that logic make sense or is it wrong?

Is logical. The only proviso I would make is that you pay for the privilege for having the offset account. In FD's case a 0.5% loading.

bloolagoon

Thrugelmir wrote: »

Is logically. The only proviso I would make is that you pay for the privilege for having the offset account. In FD's case a 0.5% loading.

Can you explain please (did say I was a thicko financially). I'm looking at their base rate tracker which is 2.79% the same as current.