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

MrLogical

25% deposit on the buy to let.
53% deposit on the new home.
buy to let has a 0.2% higher interest rate.
Thanks to you all for your replies. Im leaning towards not over borrowing now.

[Deleted User]

Id take a bit more myself. I like a little put away in case of emergencies. Yes you will be paying interest on the money, more than you earn in the bank, but for me its worth it. 

I overpay my mortgage as much as I can up to 10% extra so it soon gets paid off 

getmore4less

What rates are those and what rates would they go to if you borrowed more.

on the B2L going over 75% LTV could be a hot on rate

On the residential the  trigger will be 60%(unless you are looking at a < 60% product) so you could drop the deposit a bit .

which lender surprised the B2L is only 0.2% more.

boots_babe

Entirely depends upon your situation, your view of risk, and the type of mortgage. For example we have an offset mortgage, and have had it fully offset now for several years. We could have paid it off but prefer to have the cushion of the cash available in case of anything unexpected, as we're pretty risk averse.

We're now in the process of moving home, and could have taken a smaller mortgage than we've applied for. But once again, so that we have the surety of a large amount of cash available we've taken out a higher mortgage than we technically need. We will be overpaying hugely, so as to pay it off within probably 5 or 6 years. We've crunched the numbers and the negative impact due to the extra interest we'll be accruing as a result, is really quite small.

So for us, the benefit of having the extra ready cash available, made it very worthwhile to take out a larger mortgage.

mortgagetakingages

boots_babe said:

Entirely depends upon your situation, your view of risk, and the type of mortgage. For example we have an offset mortgage, and have had it fully offset now for several years. We could have paid it off but prefer to have the cushion of the cash available in case of anything unexpected, as we're pretty risk averse.

We're now in the process of moving home, and could have taken a smaller mortgage than we've applied for. But once again, so that we have the surety of a large amount of cash available we've taken out a higher mortgage than we technically need. We will be overpaying hugely, so as to pay it off within probably 5 or 6 years. We've crunched the numbers and the negative impact due to the extra interest we'll be accruing as a result, is really quite small.

So for us, the benefit of having the extra ready cash available, made it very worthwhile to take out a larger mortgage.

Or..... you could just have an asset that is available to take a loan on if you so wished. 

Offset is interesting because it depends whether you are accruing any additional interest, if not same logic applies. Own the asset and if necessary take a loan. 

getmore4less

mortgagetakingages said:

boots_babe said:

Entirely depends upon your situation, your view of risk, and the type of mortgage. For example we have an offset mortgage, and have had it fully offset now for several years. We could have paid it off but prefer to have the cushion of the cash available in case of anything unexpected, as we're pretty risk averse.

We're now in the process of moving home, and could have taken a smaller mortgage than we've applied for. But once again, so that we have the surety of a large amount of cash available we've taken out a higher mortgage than we technically need. We will be overpaying hugely, so as to pay it off within probably 5 or 6 years. We've crunched the numbers and the negative impact due to the extra interest we'll be accruing as a result, is really quite small.

So for us, the benefit of having the extra ready cash available, made it very worthwhile to take out a larger mortgage.

Or..... you could just have an asset that is available to take a loan on if you so wished. 

Offset is interesting because it depends whether you are accruing any additional interest, if not same logic applies. Own the asset and if necessary take a loan. 

Lending criteria change and circumstances change.

The loan you can get today may not be available tomorrow.

Offset is just borrowing less money but with easy access without going back to the begging bowl.

mortgagetakingages

getmore4less said:

mortgagetakingages said:

boots_babe said:

Entirely depends upon your situation, your view of risk, and the type of mortgage. For example we have an offset mortgage, and have had it fully offset now for several years. We could have paid it off but prefer to have the cushion of the cash available in case of anything unexpected, as we're pretty risk averse.

We're now in the process of moving home, and could have taken a smaller mortgage than we've applied for. But once again, so that we have the surety of a large amount of cash available we've taken out a higher mortgage than we technically need. We will be overpaying hugely, so as to pay it off within probably 5 or 6 years. We've crunched the numbers and the negative impact due to the extra interest we'll be accruing as a result, is really quite small.

So for us, the benefit of having the extra ready cash available, made it very worthwhile to take out a larger mortgage.

Or..... you could just have an asset that is available to take a loan on if you so wished. 

Offset is interesting because it depends whether you are accruing any additional interest, if not same logic applies. Own the asset and if necessary take a loan. 

Lending criteria change and circumstances change.

The loan you can get today may not be available tomorrow.

Offset is just borrowing less money but with easy access without going back to the begging bowl.

Offset is continuing to use the begging bowl instead of having full ownership of your asset. 

Petriix

Borrowing is very cheap right now so it may be cost neutral if invested wisely. There is also a strong argument for spending now to increase your quality of life, if you can identify lifestyle improvements which will actually improve your life.

Other kinds of investment have a high initial outlay but then reduce your ongoing costs: solar panels, electric vehicles etc.

I would borrow more if you have a plan for that money, otherwise having a lower mortgage will allow you to save more over time and ultimately pay a lot less interest. There's minimal benefit to having extra funds just sitting in the bank.

Another option is to borrow a little extra and then immediately overpay on the mortgage. This would give you an overpayment reserve which could buy you a future payment holiday if things got tough whilst avoiding the extra interest costs. This is dependent on the specific terms of your mortgage.

MrLogical

Thank to all if you who have responded. I decided to borrow the lower amount. My monthly repayments will be £250 less. I felt I had enough in the bank for a rainy day and hoping I won’t need to dip into it any time soon. Thanks again!

getmore4less

mortgagetakingages said:

getmore4less said:

mortgagetakingages said:

boots_babe said:

Entirely depends upon your situation, your view of risk, and the type of mortgage. For example we have an offset mortgage, and have had it fully offset now for several years. We could have paid it off but prefer to have the cushion of the cash available in case of anything unexpected, as we're pretty risk averse.

We're now in the process of moving home, and could have taken a smaller mortgage than we've applied for. But once again, so that we have the surety of a large amount of cash available we've taken out a higher mortgage than we technically need. We will be overpaying hugely, so as to pay it off within probably 5 or 6 years. We've crunched the numbers and the negative impact due to the extra interest we'll be accruing as a result, is really quite small.

So for us, the benefit of having the extra ready cash available, made it very worthwhile to take out a larger mortgage.

Or..... you could just have an asset that is available to take a loan on if you so wished. 

Offset is interesting because it depends whether you are accruing any additional interest, if not same logic applies. Own the asset and if necessary take a loan. 

Lending criteria change and circumstances change.

The loan you can get today may not be available tomorrow.

Offset is just borrowing less money but with easy access without going back to the begging bowl.

Offset is continuing to use the begging bowl instead of having full ownership of your asset. 

Only if you draw down the funds. In reality it is a instant line of credit that costs nothing to operate till you need the money. Having to create a new line of credit is a lot more effort and potentially not an option if circumstances have changed.