Getting a further advance on your mortgage is something to consider if you need additional money. As your local mortgage broker, we explain how further advances work and how to go about getting one.
What are Further Advances?
A further advance is a way to borrow more money on an existing mortgage. It’s simpler than remortgaging to an entirely new mortgage deal. You will need a certain level of equity in your property and you will need to meet the specific criteria of your mortgage lender.
Please note that the interest rate will usually be higher on the Further Advance than on your full mortgage.
What criteria do I need to meet?
Every lender has their own unique criteria for further advances, but a fundamental requirement is that you have enough equity in your home to cover the additional borrowing.
For example, if your home is worth £300,000 and your mortgage is currently £200,000, your equity is £100,000. The lender will not allow you to borrow all of that £100,000 – they will set a limit. Typically, the total amount borrowed must not exceed a Loan to Value of 85%. In our example, that would mean your further advance would be capped at £55,000.
There may be a minimum limit for the further advance – a typical amount is £10,000. There is often a minimum term too, usually two years. You must have had the mortgage in place for at least six months before applying for a further advance.
What can a further advance be used for?
The most common reasons for taking a further advance are:
- To raise a deposit for a second property e.g. a holiday home or Buy to Let
- To borrow funds for home improvements
- To consolidate your debt into a single monthly payment
- To release cash to pay for a wedding, university fees or other big life events.
A further advance is not the only option in this situation. It may make more financial sense for you to remortgage and extend your borrowing.
Advantages and disadvantages of a further advance
A further advance is a popular choice for those looking for a long term loan with a competitive interest rate, who do not want to remortgage.
It is generally a cheaper way to borrow money than with a personal loan. As you’re not remortgaging, there is no effect on your existing mortgage – which can be helpful if you’re on a good rate.
A further advance can also be a good option if you can’t remortgage without a big early repayment charge.
One of the disadvantages of a further advance compared with other borrowing is that the additional loan is secured on your property. Your home would be at risk if you didn’t keep up the repayments.
Although mortgage interest rates are lower than rates on personal loans and credit cards, you could end up paying more in the long term.
How long can it take to receive the money?
Lenders usually need confirmation that you have received advice from a mortgage adviser about taking out the advance. Generally it can take six to eight weeks for the money to be released.
What are the alternatives?
Alternative options to a further advance include remortgaging, equity release, a personal loan, pension drawdown or using savings and investments.
The most suitable solution will depend on how much money you need, how quickly you can repay it and your current financial situation. Our mortgage advisors will give you tailored recommendations and detailed costs.
How can GPS help me with a Further Advance?
We’re experienced mortgage and protection specialists who are here to provide tailored advice. We support everyone: First Time Buyers; those researching home buying options and schemes; home movers; plus people seeking to extend their borrowing, to remortgage or get a Buy to Let mortgage.
We are fully authorised and regulated by the Financial Conduct Authority, registered in England and will be pleased to help you identify the best ways to achieve your property goals.