Should I borrow more than I need on mortgage because I can?

MrLogical

I have been offered more than I actually need as a mortgage amount. Given times are tough, should I borrow the full amount so I have an a bigger safety net or borrow just what I need so my monthly repayments can be lower?

I don’t want to get into numbers too much, just looking for your opinions. If I borrow the full amount, it will give me one extra year of security should My wife and I both become unemployed. This is on top of the two years of security we already have in the form of savings. If I borrow more,
my monthly repayments would be about £250 more. 

I would not have considered taking the extra amount but given how things have been going this year, I’m not so sure now. 

Thanks in advance for your thoughts.

mortgagetakingages

A mortgage is for the house. You can't take the whole amount unless you are buying a house that is the value of the mortgage!

MrLogical

Thanks for the quick reply. I have two mortgage offers, one is a buy to let, the other for a new home. The amounts offered in both total more than I need to pay off my new home. Are you saying I don’t have the choice to draw down the full amounts on offer? My broker hasn’t said anything about this to me. Thanks again.

dimbo61

Unless your considering an offset mortgage and have plans to extend or do a loft conversion why would you want more debt.
The aim of the game for me is to be mortgage free with my home paid for.
Retirement should be a great time to travel, enjoy hobbies and take things easy but pensions won't go far if your still paying a mortgage or rent.

MrLogical

dimbo61 said:

Unless your considering an offset mortgage and have plans to extend or do a loft conversion why would you want more debt.
The aim of the game for me is to be mortgage free with my home paid for.
Retirement should be a great time to travel, enjoy hobbies and take things easy but pensions won't go far if your still paying a mortgage or rent.

Many thanks for this. The reason I am considering is that I can overpay 10% per year so if I decide it wasn’t needed in a year-two, I can pay it back relatively quickly. If however things gotten very tough and we end up massively eating into our savings, I may end up wishing I’d taken it.

mortgagetakingages

Has the mortgage company said you can borrow more just for some extra cash? This is confusing to me but might just be my lack of knowledge. 

I'm my head a mortgage is to pay for the house and potentially to assist with renovations by way of a secured loan on top. 

If you do have the opportunity to borrow more but no real reason that would be a straight no from me because your overpayments wouldn't have maximum impact if you carry a larger debt. 

Thrugelmir

MrLogical said:

Thanks for the quick reply. I have two mortgage offers, one is a buy to let, the other for a new home. The amounts offered in both total more than I need to pay off my new home. Are you saying I don’t have the choice to draw down the full amounts on offer? My broker hasn’t said anything about this to me. Thanks again.

Why have you applied for more than you need?  

MrLogical

Our mortgage broker managed it for us. She says we can borrow this amount or less if we want so we have the flexibility.

MalMonroe

I wouldn't borrow more than I need. You only have to pay it back, and with interest, too. 

You say, "I would not have considered taking the extra amount but given how things have been going this year, I’m not so sure now."

And for that very reason - the uncertainty of the future - I definitely would not take on any more debt than I needed. Go with your original thought. Just because it's available doesn't mean it's right.

getmore4less

You have to consider things like the LTV for each loan as that can change the interest rates.
If multiple properties  there may be good reason to chose higher borrowing  on one over the other.

B2L is likely to be more expensive than residential,  structured properly you could  borrow at the cheaper rate on residential and it still qualify for any tax relief there may be left on a letting business.

Darkslider

Do you mean borrowing at a higher LTV so you have more disposable cash left over instead of using it as a deposit? Mortgages over 95% LTV were wiped out in 2008 as far as I'm aware so I'd be surprised if that's what you've been offered?