Thick mortgage question of the day.

[valiant]

Quick question that I seem unable to find an answer for on t'internet.

I'm intending to refurbish maison d'valiant in the summer which will require me going cap in hand to the bank and asking for a remortgage.

Now, I have an idea on costs but I will need a contingency fund for any nasties that turn up or if my wife changes her mind yet again on what see wants.

So say I borrow an extra £70k but only end up spending £50k (for example) what happens to the extra £20k? Can I hand it back and have the repayments adjusted accordingly or use it to overpay (bearing in mind that some mortgages only allow a certain percentage as overpayment - could be a while doing that) or are there special types of mortgages that are competitive yet allow this sort of thing? Or do I blow the £20k on coke and hookers?

Ta!

[rsbmw]

Would suggest a mortgage that allows the 20k overpayment (tracker perhaps) would be the best bet, then remortgage again once your extension is complete to realise the new equity / LTV ratio.

Alternatively, 20k gets a decent amount of coke and hookers and seems a viable alternative.

[Countdown]

valiant said:

So say I borrow an extra £70k but only end up spending £50k (for example) what happens to the extra £20k? Can I hand it back and have the repayments adjusted accordingly or use it to overpay (bearing in mind that some mortgages only allow a certain percentage as overpayment - could be a while doing that) or are there special types of mortgages that are competitive yet allow this sort of thing? Or do I blow the £20k on coke and hookers?

Ta!

You can repay early with some but not with others. AIUI it varies from mortgage to mortgage - tracker rates/variable rates generally allow repayments, fixed rates generally don't allow it or charge an early repayment fee during the initial period.

[Sarnie]

valiant said:

Quick question that I seem unable to find an answer for on t'internet.

I'm intending to refurbish maison d'valiant in the summer which will require me going cap in hand to the bank and asking for a remortgage.

Now, I have an idea on costs but I will need a contingency fund for any nasties that turn up or if my wife changes her mind yet again on what see wants.

So say I borrow an extra £70k but only end up spending £50k (for example) what happens to the extra £20k? Can I hand it back and have the repayments adjusted accordingly or use it to overpay (bearing in mind that some mortgages only allow a certain percentage as overpayment - could be a while doing that) or are there special types of mortgages that are competitive yet allow this sort of thing? Or do I blow the £20k on coke and hookers?

Ta!

I'm a Broker!

Most products allow you to over pay by at least 10%, thats pretty standard. So, with £20k, if your balance is £200k or more then you'd be able to pay it back without issue.

If your balance was less than £200k then you could over pay up to the maximum of 10% for that twelve months and sit on the rest of the money until next year when you could overpay another 10% in that 12 months.

Or coke and hookers seems a popular option!

[Ozzie Osmond]

Under a normal mortgage the bank can't stop you repaying any amount you like at any time you like and without any charges/penalties.

However, if you take e.g. a "fixed rate" mortgage there is effectively a separate contract running alongside the basic loan and that contract can include all sorts of restrictions, including charges/penalties (so long as they are "fair").

So choose your mortgage carefully and you should be fine.

[NelsonP]

Most lenders specify that the funds must be used for home improvements.

So, spend the extra £20k on a 911. Your home will look much nicer with a 911 parked out front (assuming you don't have one already) ;-)

[AndyAudi]

Sarnie said:

I'm a Broker!

Most products allow you to over pay by at least 10%, thats pretty standard. So, with £20k, if your balance is £200k or more then you'd be able to pay it back without issue.

If your balance was less than £200k then you could over pay up to the maximum of 10% for that twelve months and sit on the rest of the money until next year when you could overpay another 10% in that 12 months.

Or coke and hookers seems a popular option!

I know my repayments are capped per calendar year so if not starting 'till summer could land ok

[valiant]

Thanks all.

Looks like the 'overpay as much as allowed until the money runs out' seems like the easiest, most straight forward option.

it just seems weird having excess mortgage money in an account earning interest while paying interest on a mortgage!