Why Borrow More?

You may want to do some work on your home, invest in another property or fund a big event. Borrowing against your mortgage is one way of accessing a lump sum, but there are costs associated. Talk to you First Mortgage advisor about the best way forward – a further advance, re-mortgaging, or something else entirely.

Why borrow more?

Borrowing more from your current lender makes sense when you want to fund home improvements, build an extension or buy land. All of these things add value to your property and make your house more of a home, so they are worth increasing your loan. Some people choose to borrow more to buy out a partner or joint borrower, or to increase their share in a shared ownership property.

However, using a further advance to pay off debts is rarely a good idea. The additional loan would be linked to your property, which you could lose if you were unable to keep up repayments. Even though interest rates on mortgages are currently much lower than those on loans or credit cards, you are paying back the money over a much longer period and so could end up paying considerably more over the long term.

How borrowing more works

When you borrow more against your current mortgage, it’s called a further advance. This is usually at a different rate of interest than your current mortgage. Borrowing more with the lender you already have makes sense if their further advance rate is competitive, or you don’t want to re-mortgage or switch to a different lender.

Things to consider

Before you apply for a further advance on your mortgage, you need to check you can afford the additional payments. Your First Mortgage advisor will go through this with you, look at your income and outgoings, and assess if you can afford an increase in mortgage payments. For a more detailed look at what to consider see

How much can I borrow?

You’ll also want to make sure that you have a good credit record before you apply, and that the value of your home has increased beyond the mortgage amount you originally borrowed – in other words, that you have equity in your property.

Most lenders have a minimum lending criteria and will expect you to meet their lending requirements regardless of whether they are already lending to you. They need to make sure they can manage the risk of lending you extra money.

A further advance is not like a personal loan – it is secured on your property. So, while the interest rate charged will be lower than an unsecured loan, if you cannot keep up the additional repayments, you risk losing your home.

Costs of borrowing more

Some lenders will charge a fee to increase your mortgage or set up an additional mortgage account on your property. Your First Mortgage advisor will look at the conditions of any lender you are considering borrowing from to make sure the fees involved are reasonable. As you are not technically remortgaging, remortgage fees are not charged, although you may have to pay for a valuation of your property to determine how much it is worth.