When does borrowing more make sense?

[danlightbulb]

This thread shows just why house prices are so high. The free issuing of vast amounts of cash by banks against mortgages.

It also shows why there are so many brand new cars on the road. Big purchases all funded by remortgaging debt in perpetuity.

Unfortunately the whole system is configured to make people borrow as much as possible and buy as many luxury goods as possible with barely any consequences, at least not short term.

 

[lookitsjonno]

Why not use the 0% card to pay for the driveway? Without knowing your income it's hard to say, £1100 isn't an excessively high balance in most cases. I've been transferring a balance for over 10 years on 0% offers, something i'm not particularly proud of but it's affordable and well managed.

Just make sure there is sufficient credit remaining on the card leading up to your next application (50%+ ideally) and make sure you never miss any bills or do anything else disastrous to hurt your credit rating.

 

[BUDFORCE]

This thread shows just why house prices are so high. The free issuing of vast amounts of cash by banks against mortgages.

It also shows why there are so many brand new cars on the road. Big purchases all funded by remortgaging debt in perpetuity.

Unfortunately the whole system is configured to make people borrow as much as possible and buy as many luxury goods as possible with barely any consequences, at least not short term.

Yup, it's clever.

Keeps the poor people poor and to greedy capitalists rich with the illusion of wealth.

People automatically assume the guy driving the brand new BMW has more money than the person driving a 10 year old Fiesta, well that isn't always the case.

 

[BennyC]

If you're borrowing more against your property to essentially lower your monthly debt outgoings then you really should be making overpayments (with the difference saved) or at least saving the capital so that you can remortgage with a lower LTV as and when.

Else all you're doing is costing yourself more in interest in the long term though ultimately will have lower monthly outgoings right now.

 

[Psycho Sonny]

He can't even borrow more against his property he's locked into a deal for 3 more years.

Which just screams - I don't know what finances are. Otherwise why would you ask the original question.

I don't see this ending well if his solution to his problem isn't even possible.

Pay the debts off. Save up then do your driveway and home renovations.

I want to convert my garage and I want to do a large log cabin build in the back garden. Guess what I'm not re-mortgaging to do either.

 

[sigma]

This thread shows just why house prices are so high. The free issuing of vast amounts of cash by banks against mortgages.

It also shows why there are so many brand new cars on the road. Big purchases all funded by remortgaging debt in perpetuity.

Unfortunately the whole system is configured to make people borrow as much as possible and buy as many luxury goods as possible with barely any consequences, at least not short term.

Nobody forces people to live beyond they means. Financial responsibility could be taught at school but how many kids would really pay attention?

 

[danlightbulb]

Nobody forces people to live beyond they means. Financial responsibility could be taught at school but how many kids would really pay attention?

Teaching it would make no difference when banks start throwing money at you when you turn 18. Student loans and student overdrafts required for university trap you young. Then at 18 youre also immediately into monthly phone contracts possibly car contracts.

Debt is borrowing from your future self. I didnt learn that lesson till I was past 30. Its a good way of expressing it though. Borrowing from a bank makes it sound anonymous whereas people can visualise their future selves somewhat.

 

[Basher]

He can't even borrow more against his property he's locked into a deal for 3 more years.

Why not? Being in a fixed term doesn't stop you borrowing more on the property.

 

[Bug One]

Why not? Being in a fixed term doesn't stop you borrowing more on the property.

No, but the fee to come out of that fixed term will make it not worth it.

Best advice - pay off your debts before considering further borrowing.

 

[Basher]

No, but the fee to come out of that fixed term will make it not worth it.

Best advice - pay off your debts before considering further borrowing.

But you don't need to come out of the fixed term to add additional borrowing

 

[Psycho Sonny]

But you don't need to come out of the fixed term to add additional borrowing

Banks aren't letting people buy homes with low ltv any more.

The bank will also dig deeper into why this is needed.

He likely wouldn't get approved under the current circumstances.

Lenders have changed their lending criteria dramatically.

He already has a large car loan and a longer than normal term mortgage. Both would go against giving him more to borrow. I don't know what his ltv is but they will want bare minimum 20% equity or likely more in his case.

 

[Basher]

Banks aren't letting people buy homes with low ltv any more.

The bank will also dig deeper into why this is needed.

He likely wouldn't get approved under the current circumstances.

Lenders have changed their lending criteria dramatically.

He already has a large car loan and a longer than normal term mortgage. Both would go against giving him more to borrow. I don't know what his ltv is but they will want bare minimum 20% equity or likely more in his case.

Given that you don't know the LTV and we don't know his income, that's impossible to say. The debts don't look at all crazy, but that's obviously dependant upon income.

The fact he's on a fixed term doesn't stop him borrowing more before that term ends (and you don't need to break out of the term to do that).

 

[glenimp617]

This thread shows just why house prices are so high. The free issuing of vast amounts of cash by banks against mortgages.

It also shows why there are so many brand new cars on the road. Big purchases all funded by remortgaging debt in perpetuity.

Unfortunately the whole system is configured to make people borrow as much as possible and buy as many luxury goods as possible with barely any consequences, at least not short term.

The majority of new car sales in the UK is through PCP, not buying outright with cash leveraged from equity in a property

 

[pepp77]

Banks aren't letting people buy homes with low ltv any more.

The bank will also dig deeper into why this is needed.

He likely wouldn't get approved under the current circumstances.

Lenders have changed their lending criteria dramatically.

He already has a large car loan and a longer than normal term mortgage. Both would go against giving him more to borrow. I don't know what his ltv is but they will want bare minimum 20% equity or likely more in his case.

If you read the posts before replying you would know roughly what the LTV is from this sentence

The mortgage is approx 145k and the house value is approx 280k, maybe slightly higher although in this particular climate who knows!

So LTV is about 50%

 

[Psycho Sonny]

If you read the posts before replying you would know roughly what the LTV is from this sentence

The mortgage is approx 145k and the house value is approx 280k, maybe slightly higher although in this particular climate who knows!

So LTV is about 50%

Then I'd question why he has such a long term if he isn't investing cash elsewhere for a return or making overpayments.

He has large equity however he is also shooting himself in the foot by paying interest over such a long period of time.

Unless he has investments which the returns on far outweigh the interest.

He could easily get equity out but on such a long term its going to cost him substantial amounts in interest.

Unless he has no plans to pay the mortgage off and plans on downsizing in the future and use the equity from that for something.

Too many variables.

 

[fobose]

28 years is not that long a term tbh. It depends how old he is. Plus he has mentioned he has two kids so him or his partner might not be in full time work at present so having a 28 year term gives them much needed finances now for doing stuff with the kids etc.

 

[kai]

28 years is not that long a term tbh. It depends how old he is. Plus he has mentioned he has two kids so him or his partner might not be in full time work at present so having a 28 year term gives them much needed finances now for doing stuff with the kids etc.

I did a 25 year mortgage at 25 years old, i struggled to sleep at night. I hate the fact that i owed anyone money including the bank. It felt like i was living beyond my means. 25 years felt like a death sentence, let alone seeing some people do 30 - 35+ year mortgages.

However i come to terms i was in the same situation as 99% of people. As soon as the 2 year fixed term ended, for the last 6 years i have paid in as much as i could afford. Last i checked, i have saved around 30K in interest alone.

 

[fobose]

That is quite the saving in interest! I had a lot of restless nights when I bought my new house as I borrowed 280k which is a serious sum to me. It also took me a long time to come to terms with it. I was 10k shy of paying off my first house in 2017 but the missus wanted to move to Cambridge.. I've gone to 23 year term this time but as of last month set up an automatic over payment of £275 a month.

 

[Basher]

However i come to terms i was in the same situation as 99% of people. As soon as the 2 year fixed term ended, for the last 6 years i have paid in as much as i could afford. Last i checked, i have saved around 30K in interest alone.

That's nice, but why would you pay down a mortgage when interest rates are so low? Surely the money could be working better for you somewhere else?

 

[kai]

That's nice, but why would you pay down a mortgage when interest rates are so low? Surely the money could be working better for you somewhere else?

After the two years, i could have found a new deal but i would not have been able to pay maybe 4x-5x at a fixed rate. Where could the money be working better, by saving over 30k interest over that period ? If i had shares, etc due to the current climate they would be bottomed out.

For me this made sense. I want to be mortgage free the time i am 35.