How To Borrow More On Your Mortgage – Forbes

April 20, 2022 By admin

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Increasing the size of your mortgage can be a cost-effective way to raise cash. It’s a particularly popular way to finance home improvements for example, but could equally be used for other purposes such as investing in a buy-to-let property. 
There are two main ways to arrange additional borrowing on your mortgage:
Which is right for you will depend on the terms of your current mortgage deal. Here, we examine the pros and cons of each option and investigate some potential alternatives.
Trussle is a 5-star Trustpilot rated online mortgage adviser that can help you find the right mortgage – and do all the hard work with the lender to secure it. *Your home may be repossessed if you do not keep up repayments on your mortgage.
Many mortgage lenders will let you take out a ‘further advance’ on the mortgage you already have. The amount available will depend on the value of your home and the size of your current loan.
Nationwide, for example, will let you borrow up to 90% of your property’s value – and offers cheaper rates to homeowners making their properties more energy efficient, while Halifax offers further advances that increase your loan-to-value (LTV) ratio up to a maximum of 85%.
As an example, if your property is currently worth £300,000 and the size of your mortgage is £210,000 (or 70% LTV), depending on your lender’s terms and conditions, you could potentially borrow up to a further £60,000 – or 20% of your home’s value – via a further advance.
A further advance increases the amount you owe to your current mortgage lender. And the borrowing is often at a different interest rate to the rest of your mortgage. 
Most lenders impose a minimum further advance amount of say £5,000 or £10,000, while the maximum you can borrow will depend on your circumstances and the amount of equity you have built up in your home.
The repayment term of a further advance is often arranged so it runs for a similar length of time to your main mortgage. But it’s also possible to condense the extra borrowing into as little as two or three years.
To be accepted for a further advance, you’ll need the following:
As a further advance is secured against your home, interest rates are often lower than on other forms of short-term borrowing, such as a personal loan.  And if you don’t want to switch mortgage lenders – perhaps because you are tied in to your current deal or just happy where you are – it can be an ideal borrowing solution. 
You’ll still need to pass your lender’s affordability checks to be approved, though, and will usually have to explain why you want the extra cash.
To apply for a further advance from your existing mortgage lender, you’ll need to follow these steps:
However, before finalising the agreement, you should compare the overall cost of the loan (including fees and interest charges over the entire term) with other options, such as remortgaging for a larger amount.
Remortgaging refers to the act of switching mortgage lenders entirely and – so long as your loan-to-value and financial circumstances allow it – you can increase the amount of your mortgage as part of this process.
If, as is common, you are able to access a much lower rate by switching lenders you may find that, even though your loan is bigger, your monthly payments don’t go up.
A good mortgage broker will do the sums and the remortgaging legwork for you. And many, such as our partner, Trussle, don’t charge customers a fee. There are still likely to be arrangement fees and perhaps valuation and legal fees charged by the new lender though, which should be factored in when comparing your options.
If you’re still on a fixed or discounted-rate deal that means paying early repayment charges for switching away, remortgaging could well prove a false economy.
A straight switch between mortgage deals with the same lender, and for the same loan amount, is known as a product transfer. As a straight product transfer doesn’t allow you to increase your loan, you won’t need to undergo affordability or credit checks. If you do want to increase your mortgage as part of this process, it becomes a further advance, as outlined above.
While you won’t be able to borrow more under a product transfer, you could use it to save money, as David Hollingworth at broker, L&C Mortgages explains: “Lenders will generally allow you to sign up for the product transfer and then schedule the switch across at the end of the current mortgage, so the process can be carried out several months before the end of your current deal.  
“However there are some lenders that may allow you to put the product transfer into effect sooner without charging any applicable early repayment charges. This could allow the borrower to jump onto a better rate even before the current deal ends.”
Again, a good mortgage broker can advise on whether a product transfer or remortgage is the best option, as well as put either you choose into effect. Meanwhile, you can get an indication of costs at various loan amounts with our remortgage calculator.
You’ll need to meet some conditions to be accepted for a remortgage, which generally takes between four to eight weeks to arrange. These include:
As with any mortgage application, you’ll also have to pass the lender’s affordability checks to be approved.
You can get an idea of the kinds of remortgage costs on the maket right now with our live table, powered by Trussle.
To remortgage your home with a larger loan amount, you’ll need to follow these steps:
If you’re unable or unwilling to remortgage or borrow money via a further advance, a last resort to consider might be a second charge mortgage. 
A second charge mortgage is another way to borrow money against your property. However, it is a completely separate loan that uses the equity in your home as security.
You can only take out a second charge mortgage with a different lender to your main mortgage provider, so you’ll have to prove to both that you can afford the combined repayments. And your existing lender must give its permission for the second lender to offer you a loan.
Other borrowing options you could consider include personal loans and low-rate credit cards.
If you have overpaid on your mortgage in the past, you may also be able to borrow back the amount you have paid over and above your commitments.
Jessica Bown is an award-winning freelance journalist covering financial, business, and consumer issues. Starting her career at the Daily Express, she has worked for The Sunday Times and a variety of online and print publications.

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