Your guide to additional borrowing on your mortgage
Looking to make home improvements or even fund a new car? You might consider borrowing more on your mortgage. We look at how additional borrowing on a mortgage works, so you can decide if it’s the right choice for you.
Key takeaways
You can borrow more money by remortgaging your property with your current lender
Home improvements, debt consolidation and school fees are common reasons for additional mortgage borrowing
The additional amount you can borrow depends on your income, existing mortgage balance, and property value
What is additional borrowing?
Additional borrowing means that when you remortgage, you borrow more money and therefore increase the overall size of your mortgage. You can then use these extra funds to pay, for example, for home improvements or a new car.
How much more can I borrow on my mortgage?
The amount you can borrow depends on various factors. These include the following:
How much equity you have in your property compared to when you initially took out the mortgage
Any potential improvements in your financial situation, such as a higher income or improved credit score
Your current mortgage balance
The lender's assessment of your affordability
Each lender has different criteria and iIt is advisable to consult with a mortgage adviser or lenders directly to understand your specific borrowing capacity.
Is it a good idea to borrow more on your mortgage?
The pros and cons of borrowing more on your mortgage depend on your personal financial circumstances. Here are a few factors to consider:
There are potential risks, because these are debts against your home. This means your home is at risk if you can't keep up with your repayments
There are lots of alternatives to borrowing on your mortgage which may be more suitable, such as taking out an unsecured loan instead
If you choose to get a further advance on your mortgage, this may affect your ability to remortgage in the future
You may have to pay a fee to leave your old mortgage contract, which can take six to eight weeks to complete
You’ll need to make sure the value of your home has increased beyond the mortgage amount you initially borrowed (known as having equity in your property)
It can also mean increased monthly payments on your mortgage
What can I use the additional money for?
When you go through the remortgage journey with us, you’ll be asked if you’d like any additional borrowing.
If you answer ‘yes’, we’ll ask you how much you want to borrow and what you want the money for. You’ll be asked to choose from the following:
Home improvements
School fees
Divorce settlement
Debt consolidation
Car purchase
Other property purchase
Other
If your requirements are substantial (i.e. more than £15,000), you may face greater scrutiny by lenders than if your borrowing requirements are smaller.
How do I get additional borrowing on my mortgage?
There are a number of options:
How to get additional borrowing on your mortgage
Further advance
A further advance means borrowing more money from your existing mortgage lender. When applying for a further advance, your mortgage lender will talk through your budget and assess your income and outgoings (e.g. debt repayments, living costs, etc.)
This way, they can make sure you can keep up with your repayments. It’s important to note that the extra money you take out will be linked to your property. Bear in mind, though, that you could lose your house if you aren’t able to keep up with your mortgage repayments.
Remortgage
Remortgaging is when you switch your mortgage debt to a new mortgage deal, either with your existing lender or a new lender. When you remortgage, you can also borrow more money at the same time by increasing your loan.
When you remortgage through MoneySuperMarket, you’ll be asked if you’d like any additional borrowing. If you are looking to borrow more, we’ll ask how much extra you want to borrow and what the money will be used for, such as home improvements, debt consolidation, or car purchases.
If the extra borrowing is substantial (usually over £15,000), you may face more questions from lenders. But overall, a lender’s decision on your application to borrow more will depend on their affordability assessment.
Second-charge mortgage
A second-charge mortgage is a type of secured loan which uses your property as collateral to borrow more money. You can use the equity you have in your home as security against taking out another loan.
This means you’ll need some equity (capital built up in your property) to apply for additional borrowing. To work out how much capital you have in your home, you can deduct the amount you owe on your first mortgage from the value of your property.
For example, if your home is worth £250,000 and your existing mortgage is for £100,000, your capital or equity is £150,000. To take out a second-charge mortgage, you’ll need to get permission from your existing lender.
In fact, you’ll have to prove to the second mortgage lender that you can afford to keep up with the repayments on both loans.
How long can I take to repay my additional borrowing?
How long you’ll have to repay depends on a few factors, including the type you take on:
With a mortgage extension, the repayment period varies based on the lender's terms, considering factors like age, income, and remaining term. It can range from no increase in the mortgage term to several years.
If you’re remortgaging, the new mortgage agreement determines the repayment period, typically ranging from 5 to 30 years.
If you’re taking out a second-charge mortgage, the repayment period follows standard mortgage terms, typically 5 to 30 years, based on factors like income, creditworthiness, and property equity.
Will I be charged any fees if I borrow more on my mortgage?
This depends on the lender, mortgage product, and your individual circumstances.
If you are simply extending your existing mortgage with your current lender you might have a better chance of avoiding fees, because you are already a customer and they are already lending on the property.
If you are looking for a new deal elsewhere, fees are more likely to apply and could include arrangement or application fees, valuation or survey fees and legal fees for conveyancing. You might also face an early repayment charge if you're still within an existing mortgage deal.
Am I eligible for additional borrowing on my mortgage?
How eligible you are will depend on several factors, including:
Am I eligible for additional borrowing?
The lender's affordability assessment
Lenders will look at your income, as well as how much you spend on bills and other regular payments
What the money is being used for
Using additional borrowing towards home improvements will usually be favoured by lenders, compared to using the money for a holiday or car.
This is because home improvements should typically add value to your property, reducing the risks to the lender. Some even offer cashback for energy efficient home improvements.
Credit rating
Your credit history and credit score will tell lenders if you’re a reliable borrower and if you’ve had payment problems in the past
If you stick with your existing lender
Your existing lender will already be familiar with your financial situation and know that you are a reliable borrower
The loan-to-value ratio of your mortgage
Your loan-to-value ratio (LTV) is what you owe on your home (the loans) as a percentage of what it’s worth (the property value). The lower your LTV, the less risky you are to a lender. This is because you own more of your home.
How long will it take before I receive the money?
How long it takes to receive the money will depend on the lender. It may be best to ask your lender for an indication of how long it will take for approval, so you know what to expect. But in some cases, it can take as little as a week for your application to be accepted.
Can I take out additional borrowing on an existing mortgage to pay off any other debts?
Yes, you can. Lenders are usually ready to approve additional borrowing on a mortgage to help you consolidate your existing debts. In fact, they often see it as a way to limit the risk that you will fall behind on your mortgage.
Bear in mind, though, that before they approve your application, lenders will want to make sure that you will be able to afford the additional cost of your loan repayments.
What are the alternatives?
Before you ask for additional funds, it’s worth considering whether there are other and better-suited ways you could borrow the money you need.
Keep in mind that borrowing more on your mortgage can work out to be far more expensive than alternatives, such as using a credit card, taking out a personal loan, or taking out a homeowner loan. This is because you’re borrowing over a much longer period with a mortgage.
We’ve used our loan calculator to highlight some examples below:
Borrowing £5,000 at an interest rate of 6% taken over 20 years would cost you £3,487.50 in interest payments (that’s just on the extra borrowing)
Yet borrowing £5,000 at an interest rate of 6% over three years (perhaps through a personal loan) would cost you £463 in interest payments
Even borrowing £5,000 at an interest rate of 12% over three years would save you money, as you’d pay just £925.97 in interest payments
Useful guides
Compare mortgage deals
Comparing mortgages is quick and simple with MoneySuperMarket. All you need to do is enter some details about how much you need to borrow and over what period of time. You’ll also be asked to include the value of your property and whether you’ll repay interest only or both interest and capital.
You can also compare mortgages and mortgage rates by their initial interest rate and monthly cost, the annual interest rate, the type of interest rate you’ll be on, and whether there are any product fees included. This will give you a list of quotes, so you’ll be able to choose a deal from a selection tailored specifically to your LTV.
The comparison tool won’t take into account your financial situation or your credit history. This means your monthly payments and deal rates could change when you go to a lender to apply for a mortgage in principle and a mortgage offer.
Why not try out our mortgage repayment calculator tool to see how much your repayments could cost you. You can also use our mortgage re-payment calculator to see what your repayments will be based on how much you’re borrowing, the interest rate and fees of the deal, and how long you will have to pay it off for.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Author
Tim Heming
Personal Finance Expert
Tim Heming is a journalist and editor who has written about personal finance for national newspapers and consumer websites for 15 years. Tim enjoys providing no-nonsense information to help consumers...
Reviewer
Rebecca Goodman
Personal Finance & Insurance Expert
Rebecca is an award-winning financial journalist with over a decade of experience writing for print and online media. Her mission is to take the jargon out of personal finance and to help everyone...
