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Further Advance Mortgage
If your home has increased in value, you may be able to take advantage of a further advance from your current mortgage lender but just because you have been approved a mortgage loan previously, it doesn’t necessarily mean you will definitely be approved again, nor is the lender under any obligation to accept you. There are certain lender’s criteria’s to be met before being accepted for a further advance. In this article we will provide you with information about borrowing more against your property.
What is a further advance mortgage?
A further advance mortgage is additional borrowing from your current lender and allows you to borrow more money against your home. The interest rate charged on a further advance is usually different to your original mortgage loan.
A further advance can be a useful option for a borrower if they do not wish to remortgage or switch to another lender and the rates offered for a further advance may be more competitive than other types of loans such as credit cards. If you are currently tied into a product then a further advance can allow you to borrow more without facing hefty early repayment charges.
There may be several reasons why a borrower might consider needing a further advance, such as raising deposit for a second property or home improvements.
A further advance loan is secured against your property so if you default on payments, you could be at risk of losing your property. Other types of unsecured loans are not tied to your property so you won’t risk losing your home if you default on payments, although any type of arrears will have a bad impact on your credit score and have an effect in your ability to apply for loans in the future.
How to get a further advance mortgage
You can apply for a further advance directly with your lender or if you are unsure of the process, you can use an experienced mortgage broker. Generally, you will not be able to apply for a further advance mortgage with your lender in the first six months of starting your original mortgage loan and if you have any mortgage arrears then the lender will not usually accept your request for a further advance especially if it isn’t brought up to date.
The main things your lender will look out for is whether you can afford the higher monthly repayments and your credit score. A good credit history will indicate to the lender that you are a reliable borrower. Having a bad credit score doesn’t mean you have no chances of applying for a further advance, but it will be assessed on a case-by-case basis and how severe your adverse credits are. Lenders will need to be satisfied that you are comfortable with the additional monthly payments and will check your affordability by comparing your current outgoings against your income, in a similar process to when you first applied for your original mortgage loan.
Lenders will also check the current value of your home and whether it has increased so they can assess whether you have sufficient equity in your property to allow you to borrow additional funds against it. The amount you will be entitled to borrow will depend on your personal circumstances but typically lenders will lend up to 85% of the property value.
It might be a good idea to approach a mortgage broker before applying for a further advance, especially if you are unsure if you can qualify. If you apply and are rejected, it could cause your credit score to decline and your credit report will not state the reason. This could create issues when you want to take out further loans in the future as your credit score will have been impacted. A professional advisor will be able to assess your circumstances first before you apply and let you know whether this type of borrowing is suitable for you. A mortgage broker can help you make your application as strong as possible to increase your chances of being accepted for a further advance.