What is a further advance mortgage?

What is a further advance mortgage?

A further advance mortgage is when you borrow more money from your mortgage lender, usually to fund home improvements, pay unsecured debts or buying someone out of the property after a separation or divorce.

How does a further advance work?

A further advance on your mortgage typically works like a second mortgage product. After getting a further advance, you'll still maintain your current monthly mortgage repayments and product with your lender, but you'll then have a additional product (likely with a different interest rate and repayment amount) to make payments to alongside it.

Are further advance mortgages more difficult to get than a new mortgage?

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. 

Learn more: What is a remortgage and how does it work?

How much can I borrow on a further advance?

The borrowing limit for a further advance differs from applicant to applicant - as it is reliant on your income (as is with a normal mortgage application). Some lenders will only approve a further advance if your loan-to-value (the size of your mortgage loan compared to the value of your home - also known as an LTV) is below a particular figure. Halifax, for example, says that the existing mortgage plus further advance must not exceed 85%. 

However, it's also important to note that a further advance can make it difficult to remortgage your property in the future, as it increases your LTV. Usually - the lower your LTV, the wider your choice of mortgage deals.

What is the difference between a second charge and a further advance?

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. 

Can I get a further advance on my mortgage?

You can usually get a further advance on your mortgage as long as you meet your lender’s affordability criteria and requirements. Here are a few factors that lenders consider when deciding whether to apply for a further advance mortgage:

1.) What is the mortgage for?

When you apply for a further advance loan, your lender will usually want to know what the loan is 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:

• Home improvements (structural or non-structural)
• Buying your property’s freehold or extending the lease
• Consolidate your debt
• Buying someone out of the property
• Buying a second property, such as a buy-to-let investment

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.

2.) You’ll still need to pass your lender’s affordability checks

When you applied for your mortgage originally, your lender will have carried out a series of checks on both your credit record and your affordability to make sure you could afford your repayments. If you apply for a further advance on your mortgage, your lender will assess both of these again - 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. 
Learn more: How can I lower my mortgage payments?

3.) Your mortgage length can play a role

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.

4.) Don’t forget to calculate the fees

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.

How to get a further advance mortgage

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.

Learn more: Why use a mortgage broker?

How long can it take to receive the money?

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.

Does a further advance affect a fixed-rate 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. 

Do you need a solicitor for a further advance?

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.