Additional Borrowing

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Additional Borrowing

It’s a common occurrence for a homeowner with an existing mortgage to require additional funds, whether it’s for home renovations, to repay some existing debts or for other expenditure such as school or medical fees. If you own a property with some existing equity and have managed to maintain your mortgage payments, there are a number of ways in which you can raise additional borrowing on your home. This can be done through a secured loan, whereby your existing mortgage remains, and you take out a second loan with a different lender, a remortgage to another lender or a further advance from your existing lender.

What is a further advance?

If you have an existing mortgage with sufficient equity in your home, you may be able to take out additional borrowing from your current lender. This would be a quicker process versus applying to a new lender, as they will have your details on file and will simply need to reassess your income and outgoings to ensure the additional loan is affordable.

It’s likely the further advance part of the loan will be on a separate product to your existing loan, meaning different rates of interest will be payable. Our brokers will therefore assess your situation to determine if obtaining a secured loan or remortgaging away from your lender if their rates are more favourable.

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Am I eligible for additional borrowing?

If you already have a mortgage in place, you will understand the checks which need to be carried out to assess your eligibility, such as ensuring your income meets affordability and covering any previous adverse credit. A lender will need to carry out these assessments again to ensure they are happy with your affordability on the additional repayments. They will also need to know what you intend to use the funds for, as lenders would not consider accepting a loan where the funds are for business or gambling purposes, due to their high-risk nature.

Some acceptable uses for additional borrowing would be: home improvements, debt consolidation, purchasing an asset such as a car or another property, school fees or medical bills. It’s likely a lender would need to see proof of what the money will be used for.

A lender would also have a limit to the maximum they would be prepared to lend when considering your existing mortgage balance and the value of the property, to ensure the additional borrowing amount does not exceed their maximum loan to value threshold.

Should I opt for additional borrowing?

By taking out additional borrowing, like your first mortgage, the funds will be secured on your property. So, it’s important to note that should you fall behind on the monthly repayments you be at risk of losing your home. As secured borrowing carries much lower interest rates than unsecured borrowing, it can appear to be the cheaper option, however it’s also worth considering that the funds will be repaid over a longer period (i.e. the remaining term of your mortgage) which can accrue interest over time. Speak with one of our expert brokers today to discuss your options for additional borrowing, and whether a secured loan, further advance or remortgage is right for you.