Have you heard of a further advance mortgage and want to know what they are, and if they are the right option for you? Keep reading to find out all you need to know about further advance mortgages.
A further advance mortgage is when you borrow more money from your mortgage lender, usually to fund home improvements, pay unsecured debts or buy out your ex after a separation or divorce. The additional borrowing will often be at a different interest rate than your existing mortgage, so it’s important to make sure the new rate is competitive before taking the leap.
Further advance mortgages are not necessarily harder to get than a new mortgage. Getting a further advance can be a fairly quick and straightforward process. In fact, it can sometimes be quicker than if you were to apply for a new mortgage or switch to a different lender, but you’ll usually need to meet your lender’s affordability criteria in order to qualify.
Quicker process than switching to a new lender
Interest rates are often more affordable than credit cards and personal loans
Could make it harder to remortgage
The term for your further advance may be longer than your existing mortgage
The main difference between a second charge mortgage and a further advance is that a further advance involves borrowing more money from your existing lender, while a second charge involves borrowing money from a different one. A second charge mortgage uses the equity in your property as a security, without making any changes to your existing mortgage.
If you were unable to keep up with your mortgage payments and your home was repossessed, your first mortgage lender would be paid before the second mortgage lender. To make up for this extra risk, second charge lenders tend to charge higher interest rates than those offering you your standard mortgage. This is why a further advance can sometimes be cheaper than a second charge, but you might get even better rates by remortgaging.
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You can usually get a further advance on your mortgage as long as you meet your lender’s affordability criteria and requirements. To work out if a further advance mortgage is the right choice for you, and if you are likely to be accepted for one, it’s a good idea to work with an expert mortgage broker.
Here are a few factors lenders consider when deciding whether to apply for a further advance mortgage:
When you apply for a further advance loan, your lender will usually want to know what the money's for, and sometimes they’ll require proof. Each lender will have their own list of acceptable reasons, but these can vary from one lender to another. Common acceptable reasons include:
When you applied for your mortgage originally, your lender will have carried out a series of affordability checks to make sure you could afford your repayments. They’ll assess your affordability again when you apply for a further advance, even if your finances have changed very little since you first got your mortgage.
Your lender might also carry out a new property valuation. If your home’s value has fallen since you bought it, you might find it harder to get a further advance.
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At Tembo, our award-winning team of mortgage advisors can help you find the right solution for you - whether that’s a further advance, second charge mortgage or remortgaging. We compare deals from over 20,000 mortgage products to find the right deal for you.
Most lenders will want you to have had your current mortgage for a set period of time. This can vary from one lender to the next, but it’s usually a minimum of 6 months. If you haven’t had your home for very long, speak to a mortgage broker for advice. You may be better suited to a remortgage, second charge mortgage or a different type of borrowing. We can help you work out the right option for you.
Some lenders will only approve a further advance if your loan-to-value (LTV) is below a particular figure. Halifax, for example, says that the existing mortgage plus further advance must not exceed 85%.
A further advance can be cheaper than other types of additional borrowing since you won’t have any legal fees, but you may need to pay arrangement fees and booking fees. Find out how much you’ll need to pay before you apply for a further advance. Need help? Talk to Tembo.
You can get a further advance mortgage by applying directly through your lender, but it’s a good idea to get independent mortgage advice first.
We can help with this! Let us know how much you want to borrow and what you’ll use the money for and our team of mortgage experts will work out whether a further advance is right for you. We’ll also explore alternatives such as a remortgage.
Please note, we do not offer second-charge mortgages.
It usually takes between six to eight weeks for the money to be released from a further advance, but it can vary depending on your lender’s process and how long it takes their underwriters to review your application. You may need to wait a little longer to receive your advance if the lender wishes to revalue your property. On the whole, getting a further advance is usually quicker than applying for a mortgage.
No, if you have a fixed-rate mortgage, your current mortgage rate will not be affected by a further advance. That’s because your further advance will have a different interest rate and term than your main mortgage. Your mortgage may be on a 5-year fix at 4.5%, for example, while your further advance may be on a 2-year fix at 6.2%. It can be helpful to think of your further advance as a completely separate product that sits alongside your mortgage.
No, you don’t need a solicitor for a further advance mortgage and this is one of the reasons it can be a quicker form of additional borrowing than a remortgage.
Although you don’t need a solicitor, it’s a good idea to talk to a mortgage broker. Here at Tembo, our team of specialist mortgage brokers can help you find the best way to borrow against your home and guide you through the process.
Speak to the mortgage experts
It can be difficult to know whether a further advance, second charge or remortgage is right for you and your individual situation. Our award-winning team can help you work out the best option for you from over 100 mortgage lenders. To get started, generate your own free, personalised recommendation today. You can then book in a free, no-obligation chat with one of our team.
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