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Getting a Further Advance Mortgage

If you need to borrow additional funds, you can ask your mortgage lender to give you a further advance on your mortgage.

In this guide, we will go into detail on how a further advance on a mortgage works and why you might want to consider the option.

Should you have any questions after reading our guide, get in touch with the team at YesCanDo Money for FEE-FREE mortgage advice and support.

What is a further advance on a mortgage?

A further advance on a mortgage is additional borrowing from your current mortgage lender. The further advance is a separate loan and is typically at a different rate than your main mortgage. You might consider this option if you don’t want to remortgage or take out another loan.

The further advance could be helpful to you for all kinds of reasons but you need to be aware that you might be subjected to a different interest rate on this extra borrowing than the rate you are being charged on your current mortgage loan.

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The differences between a remortgage and a further advance

There are two ways to arrange for additional borrowing on a mortgage.

You can remortgage to a new loan deal, be that with your current mortgage lender or a different mortgage lender, and increase the size of your loan.

Alternatively, you can ask your existing mortgage lender for a ‘further advance’ if you need extra money for a particular reason.

We go into a little more detail below.

Remortgage

If you have sufficient home equity to borrow against, you can remortgage your current deal and take out a bigger loan. This will mean switching from your current mortgage deal to a new mortgage lender that has the lowest interest rate.

Advantages of remortgaging

  • You will only have one interest rate
  • You will have one mortgage end date
  • No additional fees (if you are not remortgaging before your rate ends)

Disadvantages of remortgaging

  • If you remortgage before the end of your fixed rate, most commonly 2 or 5 years, you may have to pay the early repayment charges set by your lender.
  • The timescales of a remortgage are slower than a further advance

Further advance

With a further advance, you don’t have to switch lenders and you don’t have to change mortgages. Instead, you keep your current mortgage with your existing lender and simply increase the amount you owe to your lender.

advantages of a further advance

  • You will receive the extra funds much quicker
  • If your mortgage rate isn’t coming to an end soon, you won’t have to pay an early repayment charge to move lenders

Disadvantages of a further advance

  • You will pay a new arrangement fee
  • You will have a second additional interest rate
  • You will have two separate fixed-rate end dates

The amount your mortgage provider will lend to you will be based on the value of your home and the size of your current mortgage loan. As mentioned, your additional monthly payments will likely be at a different rate than the rest of your mortgage so it’s wise to consider your financial position before you take on this extra borrowing.

As you will be remaining with your current bank or building society, you won’t have to re-apply for another mortgage and you won’t have to worry about early repayment charges. However, if you can find a mortgage deal with lower interest rates, remortgaging might be more cost effective for you than a further advance.

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What can a further advance be used for?

Further advances can be used to fund home improvements or to raise funds for a deposit for a second property, such as a buy-to-let investment.

A further advance can also be used to consolidate your existing debts as the interest on your new debt repayments will typically be lower than the interest charged on any personal loans you hold. However, you need to remember that the advance will be secured on your home. For this reason, you might want to consider a form of unsecured lending for debt consolidation to rule out the risk of you losing your property.

Further advances can be used for other things you might need money for, such as furnishings for your home, a new car, or to cover any unexpected costs. But again, you need to consider the risk to your property. As such, you should explore all of your loan options, regardless of your reasons for wanting to borrow more money, as there are occasions when a remortgage or a personal loan could be better than an advance mortgage loan.

Can I get a further advance on my mortgage?

To be offered an advance on your mortgage, you will need to pass your lender’s affordability checks. This is when the lender looks at your outgoings, such as any other debt repayments you owe and your various living costs, and checks to see what you have left over after subtracting your outgoings from your income. If the lender thinks you will have enough money to cover your additional loan repayments, you may be given a further advance on your mortgage.

Your credit history will also be taken into account as the lender will want to know that you are a reliable borrower before lending you more money. This doesn’t mean you will be ruled out. If you have a bad credit rating but your score is low because you have a recent history of defaulting on your payments, they might turn down your application.

Before coming to a final decision, your lender will also consider your home equity (how much of the property value you own). Most lenders will require at least 20% equity in a property before agreeing to additional borrowing but you should check with your lender to learn more about their requirements.

As your chances of approval depend on all of these factors, you should…

  • Take steps to reduce your outgoings
  • Make all the payments on your outstanding debts
  • Wait until you have built up enough home equity

If you aren’t in a position to take out a further advance at this stage in your life, you might want to consider a personal loan instead.

Further advance on buy-to-let mortgage

It’s possible to take out a further advance on a buy-to-let mortgage but you will usually need around 40% equity in the property before you make your application.

Lenders have other eligibility rules too. Before agreeing to your advance, your lender will likely check that you have…

  • Owned and let your buy-to-let property for at least 6 months
  • Made full payments on your mortgage for at least 6 months
  • Not been in arrears over the last 12 months

Your current lender might have other stipulations so you should ask them about their eligibility rules when considering your borrowing options.

How long does a further advance take to process?

When applying for a further advance, you simply need to fill out your lender’s form and provide evidence of your income and savings. If you pass the lender’s checks, you will usually receive your loan within 4-8 weeks (or sooner).

The advance might take a little longer to process if the lender needs to revalue your property or if any complications arise after your application.

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Alternatives to a further advance on a mortgage

If you are thinking about borrowing money, you have a number of other options. These include:

Remortgaging

A remortgage can be a good idea if interest rates are low and you are eligible for the best deals on a new mortgage product.

You can learn more about remortgaging here.

Secured loans

Secured loans, such as second-charge mortgages or homeowner loans, often come with a lower rate of interest than an unsecured loan. But as with a further advance, your home will be used as collateral so you should take this into consideration before applying for a secured loan.

You can learn more about secured loans here.

Unsecured loans

Unsecured loans (including most credit cards) are an option if you don’t want to use your home as collateral. However, interest rates are often higher on unsecured loans and they are sometimes harder to get for people with bad credit scores.

Summary of a further advance on mortgage

If you require additional funding on top of your main mortgage, be that for home improvements, a deposit for a second property, debt consolidation, or for anything else, a further advance on your mortgage could be right for you.

You won’t have to switch to a new lender or face early repayment charges and you could benefit from a lower rate of interest than that on most personal loans and credit cards.

However, there are occasions when a remortgage could be the better option, especially if you’re unhappy with your existing mortgage deal from your current lender.

Alternatively, you might want to consider an unsecured loan if you don’t want your home to be used as security.

Choosing what is right for you?

If you’re currently looking at your borrowing options, we recommend our services to you. We will consider all of your options after discussing your situation with you and will help you make the right decision.

If you would like to take out a further advance on your mortgage, we will talk to your lender and assist you with your application.

If you decide on a remortgage instead, we will search the market for the deals with the lowest interest rate and support you with your mortgage application.

Should you want to go ahead with another loan option, such as a second-charge mortgage, we will also give you the expert financial advice and support you need.

Contact YesCanDo Money today

Get in touch with us if you would like to learn more and benefit from expert advice from our experienced team of mortgage advisors. As all of our advice and support is FREE, you won’t have to worry about any upfront fees or hidden charges if you decide to use our services.

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FAQs-Further Advance Mortgage

Yes, but there may certain conditions that you will have to meet, such as having no track record of defaulting on your mortgage payments and having enough income to cover your additional loan payments.

No, your new loan doesn’t have to be on the same term as your existing mortgage loan. You can choose either a fixed rate or variable rate term depending on your preferences.

A fixed-rate term is where the interest rate stays the same throughout the duration of the loan.

A variable rate term is where the interest rate fluctuates over the loan period in line with the Bank of England base rate and other market forces. Step rate and tracker loans are examples of variable-rate loans.

You can use the extra money for home improvements, new furnishings, home appliances, unexpected costs, or as a deposit for a second home. You might have other reasons for wanting a further advance and in the case of most lenders, there will usually be no restrictions on what you can use the money for.

If you have enough equity in your home and you can pass the lender’s affordability checks, you should be able to get a further advance on your mortgage amount.

Most advance loans take around 3 years to clear but it could take you longer or shorter than this depending on the size of your advance loan.

As part of the application process, you will need to fill out the lender’s form and show them evidence of your income and outgoings. This process only takes a few minutes. If you are granted approval by your lender, you will be sent a letter outlining the terms of your new agreement with them. If you agree to these terms, money will then be released to you. It can take up to 8 weeks for the money to be released into your account.

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Steve Roberts
Steve Roberts

Stephen Roberts MAQ is the founder of YesCanDo Money, one of the UK's largest no-fee mortgage brokers. With over 30 years of mortgage experience, he has advised and helped thousands of first-time buyers buy their first home and home movers buy their dream home. Speak to a mortgage expert today by completing our contact form:

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