Any penalties if you don't draw down all of the mortgage?

BlackHound

New Member
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Hi,
We are in conversations regarding mortgages at the moment, with the current pricings its difficult to know how much we need.
From talking to some banks - they are providing the option of taking out a more than enough mortgage and then only drawing down what you need.
Has anyone done this before?
Are there any gotchas to be aware of? (other than overspending & not being disciplined yourself)
Are there any financial penalties of not drawing down the mortgage?

Thanks in advance!
 
I would be very surprised if a bank gave you more than you needed given the loan-to-value ratios being applied by banks (as required by Central Bank rules).

It’s more likely that a bank will agree in principle to lend you “up to” a certain amount, such amount representing 80% or 90% of the value of the house.

Once you sign the mortgage contract, you’re bound to draw down that amount and pay the interest per the agreement.
 
Approvals in principle just outline the maximum they will lend you. Most people apply for mortgages before they have found the house they wish to buy, it's very common that they end up drawing down less than the maximum, and there are no issues with that.
 
Once you sign the mortgage contract, you’re bound to draw down that amount and pay the interest per the agreement.

This might be correct, but you are entitled to repay any or all of a variable rate mortgage loan without penalty. So you could repay it the same day. In practice the lender is quite happy for you to draw down less than you were approved for.
 
Always a good idea if building, apply for the max you qualify for but you don't need to draw it all down but in the event of overspends etc the buffer is there.

A lot better than applying for top ups afterwards. No catch to it really other than you mortgage protection will be for the amount approved.
 
This might be correct, but you are entitled to repay any or all of a variable rate mortgage loan without penalty. So you could repay it the same day. In practice the lender is quite happy for you to draw down less than you were approved for.
I have been going through the Bank of Ireland mortgage approval process recently. One of the terms I had to agree to was something along the lines of "I do not intend to pay off a large lump sum of the mortgage in the first six months". I haven't seen the contract yet to see if that is included or what the penalty would be exactly.
 
I have been going through the Bank of Ireland mortgage approval process recently. One of the terms I had to agree to was something along the lines of "I do not intend to pay off a large lump sum of the mortgage in the first six months". I haven't seen the contract yet to see if that is included or what the penalty would be exactly.
is that for their cashback mortgage? - The high interest rates on those mortgages effectively pay for the cashback
 
No penalty as long as you’ve prearranged what you need you can draw down less. Your solicitor will request the actual amount you want from the bank and you’ll have to give the balance to the solicitor before closing and they then give all the money to the seller. I’ve done this a few times and it’s never an issue, one time I think it was 50k less than the bank was expecting me to borrow.
 
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