Further Advance and Additional Mortgage Borrowing

If you need to raise additional funds against your home, a further advance or additional borrowing on your existing mortgage may be a practical solution. This page explains what a further advance is, how lenders assess applications, the documents you may need and the alternatives worth considering. Mortgage One can review your current mortgage, check what your lender offers and compare the options across the wider market so you can make an informed decision.

Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.

For a free initial consultation about borrowing more on your mortgage, call 01202 155992 or contact Mortgage One.

What Is a Further Advance?

A further advance is an additional loan taken from your existing mortgage lender, secured against the same property. It sits alongside your current mortgage as a separate sub-account, usually with its own interest rate, term and monthly payment. Your original mortgage deal stays in place, which means you avoid early repayment charges and keep any competitive rate you may already hold.

Because you are borrowing from your current lender, the process can be quicker than a full remortgage. However, the rate offered on the further advance may differ from your existing mortgage rate, and in many cases it will be higher. The amount you can borrow depends on the equity in your property, your income and the lender’s own criteria.

Further Advance Versus Remortgage

A further advance keeps your existing mortgage in place and adds a new borrowing tranche on top. A remortgage replaces the entire loan, potentially with a different lender and a new rate across the full balance. Which route is more cost-effective depends on several factors, including your current rate, any early repayment charges, arrangement fees and how much additional borrowing you need. Mortgage One’s remortgaging guide explains the full remortgage process and when switching lender may work in your favour.

If you are mid-way through a fixed-rate deal with a significant early repayment charge, a further advance often makes more sense because it avoids triggering that penalty. If your existing deal has ended and you are on your lender’s standard variable rate, remortgaging to a new lender with additional borrowing built in may be the stronger option.

How Lenders Assess a Further Advance

Even though you are an existing customer, your lender will treat a further advance as a new lending decision. The key areas they assess include:

•       Affordability. Your income, outgoings and existing debts are reassessed against the lender’s current stress test, which may be tighter than when your original mortgage was approved. Mortgage One’s mortgage affordability guide covers how lenders calculate what you can borrow.

•       Loan-to-value. Most lenders cap the combined loan-to-value across your existing mortgage and the further advance at around 85%, although some set the ceiling lower, particularly where the purpose is debt consolidation.

•       Credit history. A fresh credit search is carried out. Any adverse credit recorded since your original application could affect the outcome. The Mortgage One guide to improving your credit score explains how to prepare.

•       Property valuation. The lender may require a new valuation to confirm the property’s current market value and the available equity.

•       Purpose of borrowing. Lenders ask what the funds are for. Common acceptable reasons include home improvements, purchasing a vehicle, funding a deposit on a second property or consolidating unsecured debts. Some lenders restrict certain purposes, and policies vary.

To find out whether a further advance or remortgage is the right route for your circumstances, call 01202 155992 or contact Mortgage One.

Common Reasons for Additional Borrowing

Homeowners apply for further advances for a range of reasons. The most common include:

•       Home improvements. Extensions, loft conversions and renovations can add value to your property, although there is no guarantee that the increase in value will match the cost of the work.

•       Debt consolidation. Rolling credit card balances or personal loans into your mortgage can reduce your monthly outgoings, but it converts short-term unsecured debt into long-term secured debt. You could pay more in total interest over the life of the loan, and your home is at risk if you fall behind on repayments.

•       Raising a deposit. Some homeowners release equity to fund a deposit on a buy-to-let property or a second home. Lender criteria for this purpose vary, and not all lenders permit it through a further advance.

•       Major life events. Costs such as a family member’s wedding or school fees are sometimes funded this way, although careful consideration of the long-term cost is essential.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

Documents You May Need

Requirements vary by lender, but you should expect to provide:

•       Recent payslips or, if self-employed, your latest SA302 tax calculations and tax year overviews

•       Bank statements covering the most recent three months

•       Proof of identity and address

•       Details of the purpose of the additional borrowing

•       Quotes or estimates if the funds are for home improvements

Mortgage One’s mortgage application guide sets out the full application process and what to prepare before you apply.

Alternatives to a Further Advance

A further advance is one option, but it may not always be the most suitable. Alternatives worth considering include:

•       Remortgaging with additional borrowing. Switching to a new lender and increasing the total loan can sometimes deliver a lower blended rate, particularly if your current deal has ended.

•       Second charge mortgage. A separate secured loan from a different lender, placed behind your existing mortgage. This can be useful if your current lender declines a further advance or if you want to keep your existing deal untouched. The Mortgage One second charge mortgage guide explains how these work.

•       Unsecured personal loan. For smaller amounts, a personal loan avoids putting your home at additional risk. The interest rate will typically be higher, but the loan term is shorter, and no security is taken against your property.

•       Equity release. For homeowners aged 55 and over, equity release may be an option. It works differently from standard mortgage borrowing and is not suitable for everyone. Independent advice is essential. The Mortgage One equity release guide covers the key considerations.

How Mortgage One Can Help

Not every lender offers further advances, and the rates, criteria and processes differ significantly. Mortgage One has whole-of-market access, which means your options are not limited to your current lender’s range. After reviewing your existing mortgage, income, equity position and the purpose of the borrowing, Mortgage One can advise on whether a further advance, remortgage or alternative route is most appropriate for your situation.

Every case is different. Factors such as self-employed income, complex credit history or borrowing at higher loan-to-value can narrow the field, but there are lenders who cater for a wide range of circumstances. The Mortgage One lending criteria guide explains the main areas lenders focus on and how different profiles are assessed.

For a free initial consultation about additional borrowing, call 01202 155992 or contact Mortgage One.

The information provided in this article is for general guidance only and does not constitute personal or regulated financial advice. If you’d like to understand what these moves could mean for you, speak to Mortgage One. We can explain your options and timings based on your specific circumstances.

Some Buy to Let mortgages are not regulated by the Financial Conduct Authority.

FAQs

1. What is the difference between a further advance and a second charge mortgage?

A further advance comes from your existing mortgage lender and sits alongside your current mortgage. A second charge mortgage comes from a different lender and is secured behind your first mortgage. Both are secured against your property.

2. Can I get a further advance if I am self-employed?

Yes, although your lender will reassess your income using their current criteria. You will typically need to provide your latest SA302 tax calculations and tax year overviews. Some lenders require two years of trading history.

3. Will a further advance affect my existing mortgage rate?

No. Your existing mortgage deal remains unchanged. The further advance has its own rate and term and runs as a separate sub-account.

4. How much can I borrow with a further advance?

The amount depends on the equity in your property, your income and the lender’s maximum loan-to-value. Most lenders cap the combined borrowing at around 85% of the property’s current value, although this varies.

5. Is a further advance cheaper than a personal loan?

The interest rate on a further advance is usually lower than a personal loan because the borrowing is secured. However, because the repayment term is typically longer, you may pay more in total interest. A further advance also puts your home at risk if repayments are not maintained.

6. Can I use a further advance to consolidate debts?

Some lenders allow this, although criteria and maximum loan-to-value limits may differ from standard further advance terms. Think carefully before securing other debts against your home.

7. How long does a further advance take to complete?

Timescales vary by lender. In straightforward cases, a further advance can complete within two to four weeks because there is usually no solicitor involvement. More complex cases, or those requiring a property valuation, may take longer.

8. Do I need a solicitor for a further advance?

In most cases, no. Because you are borrowing from your existing lender with no change to the first charge, solicitor involvement is usually not required. However, some lenders or circumstances may require legal work, particularly where the purpose is debt consolidation.