Increasing your mortgage: Borrowing more money

It's possible to borrow more from your mortgage lender without remortgaging or moving house, but this isn't always the smartest decision.

On first glance, increasing your mortgage to borrow extra money might seem like a shrewd move as the interest rate is likely to be lower than what you can get for a credit card or personal loan.

However, you’ll often end up paying more in the long term, and there’s the added risk of losing your home or falling into negative equity.

That’s not to say you should never increase your mortgage, but it’s important to weigh the pros and cons before you do so.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

Should I increase my mortgage?

When comparing increased mortgage debt against alternatives like a personal loan, it’s smart to compare the overall cost, rather than the interest rate charged on the debt.

It might cost you less per month to add extra debt to your mortgage, but it’ll usually cost you a lot more overall because you’ll be paying interest on it for the entirety of your mortgage term.

Here’s an example:

  • Borrowing £5,000 on a credit card with an interest rate of 17.5% for one year = £875 interest.
  • Adding £5,000 to your mortgage with an interest rate of 3.5% for 25 years = £4,375 interest.

When applying for a further advance on your mortgage, your lender will conduct a series of checks to ensure you can afford it, but you should run the numbers yourself before applying.

After all, if you fall into mortgage arrears, you’re in danger of having your home repossessed. You’ll also decrease the equity you have in your property, making it more difficult to be approved for better mortgage rates in the future.

These are two issues you won’t face when borrowing through other means, and you should carefully consider them before you decide whether a mortgage advance is right for you.

Will I be approved for a mortgage advance?

As well as passing your lender’s affordability checks, you’ll usually also have to meet the following additional criteria to be approved for an advance:

  • Pay for your property to be revalued
  • Have no mortgage arrears
  • Have made a minimum amount of timely mortgage repayments (typically at least six months’ worth)
  • Retain a minimum amount of equity in the property (typically 10-15%)
  • A valid reason for borrowing the money (more on this below)

If you can meet your lender’s specific criteria, can pass a credit check and can afford the additional repayments, there’s every chance you’ll be approved for a mortgage advance.

Can you borrow on a mortgage to pay for home improvements?

Your mortgage lender will have the following main priorities:

  • To make sure you can afford to meet your monthly repayments
  • To make sure it can reclaim what it’s owed if you fall into arrears

If you spend money from a mortgage advance on home improvements, this boosts the odds of both priorities being met, so lenders are often happy to allow this.

If you’re spending the money on a round-the-world trip or another one-off expense that doesn’t boost your finances, you may face more resistance from your lender.

Can you borrow on a mortgage to pay off debts?

Lenders are usually happy to approve a mortgage advance to consolidate your debts, as this often decreases the risk of you falling behind on your mortgage.

However, they’ll need to be satisfied that you can afford the additional cost of your mortgage repayments.

Could remortgaging be an option if you want to borrow more?

If your application for a mortgage increase is refused, it may be possible to borrow extra money by remortgaging with another lender. There may even be lenders offering a better rate.

However, there are usually a number of one-off fees involved. Often, you’ll have to pay an arrangement fee and a valuation fee to your new lender as well as an early repayment charge with your current mortgage provider.

In many cases, it’ll prove uneconomical to pay these fees just so you can borrow more.

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