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

boots_babe

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. 

Yes absolutely, we could do that, and I'm sure a lot of people may prefer that.

But for us, being risk-averse, I'd prefer to have the funds there ready and available, without having to apply afresh for funds should they be needed. For example who would have ever envisaged there being a global pandemic and the resultant impacts on the economy? We are both lucky in that neither of us has been negatively affected work-wise, but it could easily have been different. Had we both lost of our jobs, if we had paid off our mortgage there's no way we'd be able to obtain a new line of credit. So I'm far more comfortable keeping the funds offset and readily available, as you never know.

If doing this was costing us significantly then we wouldn't do it, but the real cost is actually very tiny, in return for what we see as a strong benefit of plenty of ready cash.

getmore4less

Lenders are withdrawing bonus and regular overtime as acceptable income streams how long thatwill last who knows.

Plenty of other scenario where borrowing money at reasonable rates becomes difficult.
With houses you own the asset anyway 
The only difference is the cost of the borrowing if you have any
100% offset zero cost can be paid off at any time.