In This Blog We Will Cover:
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- What Is A Further Advance?
- Reasons For Considering Additional Borrowing With A Further Advance
- Affordability Evaluations
- Why Use A Financial Adviser?
- Fees To Expect & Documents Required
- What To Do Next
What Is A Further Advance?
Further advance is another name which is commonly used for additional borrowing. Essentially, this involves the process of taking out another loan with your current mortgage lender, which is secured against your property. This means that you are borrowing more money on top of your existing mortgage, and the additional amount is added to your current mortgage balance.
It is important to note that this type of borrowing is subject to the lender’s approval, and they will assess your financial situation to ensure you can afford the increased repayments. Additionally, the terms and interest rates for the further advance may differ from your original mortgage, so it is crucial to understand the implications and costs involved before proceeding.
Reasons for Considering Additional Borrowing With A Further Advance:
There are several motivations for seeking extra funds via a further advance, with some of the most common listed below:
Home Improvements
Home improvements are a frequent reason for obtaining a further advance. By securing a home improvement loan, you can increase your property’s value through renovations, such as upgrading your kitchen or bathroom. You might also choose to modify your home to accommodate changing needs by extending or adding extra living space, which can be more economical than selling and moving. Borrowing for home improvements not only enhances your home’s value but can also include energy-efficient upgrades, like double-glazing or a new boiler, which can lead to long-term savings.
Capital Raising
Capital raising involves borrowing more to fund investments, often for major purchases like a new vehicle or an additional property.
Educational Fees
Providing the best education for our children can be costly. According to the Independent Schools Council’s 2024 research, private school fees can range from £6,363 to an impressive £13,954 per term (including boarding). Consequently, some mortgage lenders allow you to borrow extra on your mortgage to cover these costs.
Transfer of Equity
When a mortgage is jointly held, both parties are liable for it, regardless of their living arrangements. Therefore, during a relationship breakdown, one party may need to borrow more to buy out the other from the mortgage/property. This enables the property and mortgage to be transferred solely into one name.
Debt Consolidation
Debt consolidation involves taking out new credit to settle existing debts. While this can incur additional costs, it’s important to understand the risks, so seeking unbiased advice before proceeding is crucial. Debt consolidation may not be suitable for everyone, so it’s essential to explore all available options to ensure you’re making the best decision for your circumstances.
Affordability Evaluations
To increase your borrowing on an existing mortgage, you must pass your lender’s affordability evaluations, similar to when you initially applied for the mortgage. Your Mortgage Adviser will assess your income and expenses to determine the amount of additional borrowing you can request. The amount you can borrow will also be subject to each lender’s lending criteria, which usually restricts additional borrowing to a certain loan-to-value ratio (the percentage of borrowing compared to your property’s value).
What Documents Are Needed To Borrow More On Your Mortgage?
When applying for extra borrowing, your lender may require specific documents. These are an example of what you may need.
Proof of income ( payslips, P60s, or self-assessment tax returns)
Bank statements
A new credit check
Estimates for any planned home improvements
Why Use An Adviser Such As B-advised?
Financial advisers provide access to the best deals by having a comprehensive view of the market, offering a range of options from numerous lenders, including exclusive offers available only through brokers. This ensures you receive the most favourable interest rates and repayment terms.
Unlike banks, brokers advocate for your interests rather than the lender’s. They offer expert financial advice, prioritising your needs over commissions. At B-Advised, our skilled brokers are dedicated to securing the best deal for you. Brokers also save you time and effort by handling the research and paperwork, allowing you to focus on your move.
They offer cost savings by providing loans at specialist broker rates, which lowers the overall cost of your loan. They clearly outline all expenses, ensuring you understand where your money is going.
Additionally, brokers help you avoid negative impacts from trying to go it alone by guiding you through the process, which helps determine how much you can borrow and strengthens your property offers, while preventing potential credit score issues from declined applications.
What Fees Should You Anticipate?
At b-advised, we have a standard fee of £495, although this may change based on your specific situation. Fees can also differ between lenders.
Here are some lender fees you might encounter:
Administration Fee: Some lenders may charge up to £100, which can be paid upfront or added to your mortgage balance.
Telegraphic Transfer Fee: Typically around £40, this fee covers the cost of transferring funds to your account and may be deducted from the loan amount each time funds are released.
Revaluation Fee: If you plan to borrow a significant amount relative to your property’s value (loan-to-value ratio), a valuer might need to assess your property. If so, a fee of up to £150 could be charged for each valuation.
Product Fee: Certain mortgage products may include a product fee. Your Mortgage Adviser will guide you through this process and clarify any applicable fees.
What To Do Next?
If you are looking for expert advice in additional borrowing, Get in touch with us today!
We service the whole of the UK and fully regulated by the FCA.
Our team of experienced financial advisers are ready to assist you in navigating the complexities of securing extra funds, ensuring you make informed decisions tailored to your unique financial situation.
We pride ourselves on offering personalised guidance and support throughout the entire process, from initial consultation to finalising your borrowing arrangements.
Our reviews speak for themselves, showcasing the satisfaction and success of our clients. We invite you to explore these testimonials by clicking here, and see how we have helped others achieve their financial goals. Don’t hesitate to reach out and discover how we can assist you in making the most of your borrowing opportunities.
