Everything you need to know about getting a further advance
Navigating the realm of mortgages can often feel overwhelming, especially when considering additional borrowing options such as further advance mortgages. In this comprehensive guide, we delve deep into the intricacies of further advance mortgages, offering insights into their workings, benefits, drawbacks, and comparing them with alternative options such as remortgaging and secured loans.
Introduction to Further Advance Mortgages
Further advance mortgages present a unique borrowing opportunity for existing homeowners. This facility allows you to borrow more money from your current mortgage lender, which is particularly useful for various purposes such as home renovations, funding a second property, or consolidating debts.
Key Features of Further Advance Mortgages
- Additional Borrowing: Borrow extra funds from your current mortgage provider.
- Separate Account and Interest Rate: The further advance is typically treated as a separate account with its interest rate.
- Quick Access to Funds: Generally, a quicker process than remortgaging.
Evaluating the Pros and Cons of Further Advance Mortgages
Before diving into a further advance, it’s crucial to weigh its advantages and disadvantages to gauge if it aligns with your financial needs and goals.
Advantages
- Speed of Process: Faster access to funds compared to remortgaging.
- Avoidance of Early Repayment Charges: Beneficial if your mortgage deal isn’t near its end.
- No Need to Switch Lenders: Simplifies the process by sticking with your current lender.
Disadvantages
- Additional Interest Rate: Potentially higher rates compared to your existing mortgage.
- New Arrangement Fees: Additional costs involved in setting up the advance.
- Two Separate Loan Periods: Managing two different loan timelines can be complex.
Comparing Further Advance with Remortgaging
Understanding the difference between a further advance and remortgaging is crucial in making an informed decision.
Remortgaging
- New Mortgage Deal: Potentially lower interest rates with a new lender or loan.
- Consolidation of Debt: One single mortgage with a unified interest rate and payment period.
- Potential Early Repayment Charges: Applicable if switching before the end of your current deal.
Further Advance
- Retain Current Mortgage: Additional borrowing on top of your existing mortgage.
- Quick Fund Access: Easier and faster processing.
- Multiple Rates and Terms: Managing two separate mortgage agreements.
Eligibility and Application for a Further Advance
When considering a further advance, understanding the eligibility criteria and application process is essential.
Eligibility
- Affordability Checks: Lenders assess your income, outgoings, and credit history.
- Home Equity Requirement: Typically, at least 25% equity is required.
- Good Repayment History: A strong track record of timely mortgage payments.
Application Process
- Advice and Research: Consult financial experts and compare options.
- Speak with Your Lender: Understand their specific terms and conditions.
- Evaluate Your Finances: Ensure you can manage the additional repayments.
- Apply: Proceed with the application through a broker or directly with your lender.
Utilizing a Further Advance
Further advances can be employed for various purposes, from enhancing your living space to investing in a second property. Here are some common uses:
- Home Improvements: Upgrade or extend your current home.
- Property Investment: Deposit for a buy-to-let venture.
- Debt Consolidation: Merge existing debts into a single, manageable loan.
Alternatives to Further Advance
If a further advance doesn’t align with your needs, consider these alternatives:
- Remortgaging: A new mortgage deal could offer better rates and terms.
- Secured Loans: Lower interest rates but with your home as collateral.
- Unsecured Personal Loans: A viable option if you prefer not to use your home as security.
Conclusion
Further advance mortgages offer a flexible solution for homeowners seeking additional funds without the complexities of changing their current mortgage deal. By carefully evaluating your financial situation, understanding the differences between further advance and remortgaging, and considering your long-term financial goals, you can make a choice that best fits your needs. As always, seeking professional advice is recommended to navigate these decisions effectively.
This guide aims to provide you with a thorough understanding of further advance mortgages, empowering you with the knowledge to make the best decision for your financial future. Remember, every financial situation is unique, and it’s crucial to tailor your decision to your individual circumstances.
