A common reason clients contact us whilst they’re within their fixed deals is the need for additional borrowing. Often for home improvements, but sometimes for debt consolidation or purchasing another property.
The existing fixed rate mortgage offers a set interest rate for a specific period, providing stability. However, it will usually have early repayment charges if you alter the mortgage during the fixed term. The simplest option is to raise the funds when you next remortgage (when your fixed rate product expires) however, if the funds are needed sooner, there are alternative options available.
Further Advance:
This involves borrowing more money from your existing mortgage lender. It’s potentially a simpler process as your lender already has your financial information and there is not usually additional legal paperwork involved. The additional borrowing can be on a fixed or variable / tracker rate which runs concurrently with your original fixed rate product. From our experience, this will usually be the cheapest option compared to other options below.
The lender will still need to fully assess the affordability of the loan, this would include the additional borrowing and the current mortgage balance. Lenders will limit the level of additional borrowing to a certain percentage value of the property – this can vary from lender to lender. Other options, such as a secured loan, may allow borrowing at a higher level.
Second-Charge Mortgage:
This is a separate loan secured against your property, in addition to your existing mortgage. Typically, the interest rate will be higher than what you will be offered via a further advance. Your primary mortgage lender will also need to give permission for the additional charge on the property; there can be a small fee for this.
Unsecured Personal Loan:
This is a loan that is not secured against your property, so will not affect your mortgage. This can be a faster way to get access to funds. Unsecured loans usually come with higher interest rates than secured loans and be limited to lower amounts, e.g. the maximum with most lenders is £25,000.
If you are looking to raise additional funds, we are here to help. The simplest thing to do is give us a call and we can discuss the figures with you and work out the best option for you.