Borrowing more than required from the bank for the mortgage, good or not?

tobeloy

We have the possibility of borrowing up to 14k more than we require for our mortgage. While it is very tempting as it will allow us to carry out some improvements that are required in the new property I am just wondering in the long term how cost effective in terms of interest it would be.

I am not great with figures and currently we stand to have a 5 year fix mortgage at 2.58%, comparing this to a loan am I being stupid and does it generally result in paying a hell of a lot more interest in the long term?

Appreciate any thoughts

getmore4less

Rate and how fast you pay it back determine how much it costs you.

You can ignore the term of debts if you can set your own payments(overpay) as that what determines the cost.


If you need extra money and can get it cheaper than the mortgage rate then don't borrow more on the mortgage if you can't get it at a cheaper rate borrow it.

There is the cost of haviong the cash sitting there untill you use it but not having enough to finish the jobs will be very inconvenient.

Landofwood

100% mortgages are back?

mrginge

tobeloy wrote: »

We have the possibility of borrowing up to 14k more than we require for our mortgage.
....
Appreciate any thoughts

My thoughts are that you might have got the wrong end of the stick.

Caz3121

tobeloy wrote: »

We have the possibility of borrowing up to 14k more than we require for our mortgage.

Would this be a case of taking a higher LTV and keeping £14k of your deposit back?

Mortgage_Mark_2

with a 5yr fix at that rate, it's clearly a case of going for higher borrowing rather than something like 70% LTV, most certainly not 100% LTV, but there are details, like figures, missing.

Also don't be fooled by the '2.XX% is cheaper than a loan' - if over the same term, of course it would be, however you'd be paying 2.XX% a year, each year, for 20/25/30yrs, rather than 5% or whatever for 2/3/5 yrs.... The devil is in the detail.