Remortgaging your property can improve your financial situation by lowering the monthly repayments or switching to a fixed-rate mortgage. However, if you want to borrow more money, you might wonder if remortgaging is the right solution.
The good thing is, you can borrow more money – if you want to. However, borrowing a larger sum will obviously increase your debts, so it’s not a decision you should enter into lightly.
To find out more about whether borrowing more money is right for you and how you can do it, read on – because we’ve got everything you need to know.
What is remortgaging?
When most people buy a property, they raise a lump sum of cash as a deposit and then borrow the rest from a lender. Entering a mortgage agreement is a serious decision, and providers have strict lending criteria to ensure people can meet their monthly repayments.
Homeowners often seek a new mortgage agreement when their fixed-rate period ends, as moving onto the lender’s standard variable rate often increases the monthly payments.
While the process can be time-consuming, switching to a new provider or changing your current plan with your existing lender can be beneficial because you can take advantage of better rates.
While the majority of people choose to borrow the value of their home, others might want to raise some additional cash. If you do this, you increase the size of your mortgage and will have to pay back more money.
However, the main benefit of additional borrowing is using the money for renovations, buying a new car, or anything else you might need.
Of course, you will have to keep up with your new monthly payments, and numerous factors define whether you’ll be able to borrow more.
Borrowing more money: what options are available?
If you’re interested in remortgaging to release equity or find better terms, plenty of options are available, but some lenders won’t allow additional borrowing.
Here’s how you might be able to borrow more.
Find a new lender
You can always find a new lender if your current mortgage lender doesn’t let you borrow a larger amount. When you apply for a mortgage or go through a broker, they’ll ask you if you’d like additional borrowing, which makes the entire process easier.
You’ll need to explain the extra money, and you’re more likely to be accepted if it’s a stable opportunity.
For example, home improvement or a new car is more stable than debt consolidation or taking a dream holiday – but some lenders will look at your credit rating and payment history to make a decision.
If you want to borrow more from your existing mortgage lender, it’s known as a further advance. Some people use this option to fund renovations, while others might want to raise money for a deposit on another property.
Lenders will evaluate your ability to pay off the mortgage by looking at your current payment play, monthly outgoings and credit rating.
Any money you borrow will also become part of the current mortgage deal, so if you don’t make the new repayments, you could lose your home.
Second charge mortgage
Second-charge mortgages are similar to further advances because your property will be collateral for any money you borrow. The amount you’re eligible to borrow depends on your current equity because you can’t borrow against a mortgage.
For example, if your property is worth £250,000 and your outstanding mortgage amount is £210,000, you’ll only be able to get a second charge mortgage for a maximum of £40,000.
Lenders don’t just look at the loan-to-value ratio; they also analyse your monthly repayments, any defaults on current or previous loans, and your monthly outgoings to see whether you can afford the repayments.
How a mortgage lender will assess your eligibility
If you decide that you’d like to proceed, you’ll have to apply for extra borrowing, and there’s no guarantee that your existing – or a new lender- will offer the money.
The amount you receive completely depends on the following factors:
The purpose of the money
You’ll need to explain what you’ll do with the money. Home improvements are looked upon favourably by lenders because they’ll increase the value of your property and are a stable investment.
However, buying a new car or paying private school fees are less stable because you’re borrowing money with no clear return on investment.
Using the money for other debt repayments could also cause problems because lenders might worry that you cannot manage money effectively.
Each case is unique, so the best way to navigate this stage is by creating a detailed plan of how you’ll repay the money.
All prospective mortgage deals are only successful if you pass the lender’s affordability assessment. Your mortgage broker or lender will analyse your monthly outgoings, including current mortgage and debt repayments.
They’ll also look at your monthly bills and other expenses to verify if you can afford the mortgage.
Loan to value of your home
As we covered before, the loan-to-value ratio refers to how much equity you have in the property. Most lenders prefer people to have an LTV of 80% or less, but specialist providers might make exceptions.
All lenders want to know that they’re supplying a loan to responsible individuals, and your credit record is central to a successful application.
People with an excellent credit history will have access to more mortgage lenders than those with a fair score, but that doesn’t mean you won’t get an offer.
The critical thing to remember is people with lower credit scores have to deal with lower interest rates.
Working with a mortgage broker can help you get the best deal for your needs
Mortgage brokers work with various lenders to find the best mortgage products for their clients. They’re able to shop around for the best rates and terms, and they can advise the different types of mortgages available.
Believe Loans is a professional mortgage broker dedicated to helping our clients meet their financial goals, no matter their circumstances.
When you work with us, you get to work with a team of brokers who always go the extra mile.
We partner with the best lenders
The main advantage of brokers like us is accessibility. Whether you have bad credit or need to borrow larger sums of money, we’ll go out of our way to help you. We partner with many lenders, so we’re sure to find the right solution for you.
Zero upfront costs
While many mortgage brokers charge an upfront fee, we do things differently. Once we arrange a new mortgage or help you find a lender that lets you borrow more money, we’ll add our fees to the amount.
Doing this enables you to save money, as you pay zero money upfront.
Work with an award-winning team
When it comes to professionalism, we surpass all expectations. We’re an award-winning second-charge mortgage team. Much of our success comes from our commitment to customer service and giving clients the best solution for their borrowing needs.
Whether you want to borrow large or smaller sums of money, we guarantee we’ll be able to help you.
How it works
Securing one of our lucrative remortgage deals gives you access to a better future. When you choose to work with us, you can take advantage of speedy and convenient service fully tailored to your needs.
All of our prospective clients receive a free consultation, so we can learn more about your financial state and how much you want to borrow. There’s no obligation to choose us as your broker, but we’re confident you’ll love our professional service.
We search our database for the best remortgage deals
With so many lenders working with us, you’ll have plenty of options. Of course, if your credit score is poor or you lack affordability, we’ll need to find one of our specialist providers, which can take a bit more time.
Paperwork and fees
If you’re switching to a new lender, you’ll have to pay for a property valuation and cover the cost of the arrangement fees. When all the paperwork is in place, the money will go into your account, and you can enjoy finding your new renovations, transportation or whatever else you’re planning.
What alternatives are available?
If prolonged mortgage payments aren’t your thing, you can explore other options. However, mortgages are one of the more stable borrowing agreements because they let you make monthly repayments over the years instead of months – which isn’t usually possible with other loans.
Credit cards are one of the most accessible solutions, but they have some drawbacks. You’ll only be able to borrow smaller sums with a credit card, with most offering between £3000 to £4000.
Also, the interest rates on credit cards are often high, and if you have poor or fair credit, you’ll end up paying a lot more in the long term.
A personal loan is a borrowing agreement that doesn’t require you to use your home as collateral, so it can be popular for short-term loans. However, a short-term loan also has a higher interest rate, and people often underestimate how much they’ll pay.
While borrowing money from a mortgage lender might seem counter-productive, the monthly mortgage repayments are lower than personal loans, and you’ll pay less.
Also, just because you don’t offer your property as collateral doesn’t mean you can’t get into trouble when defaulting on payments.
The debt provider can call in the bailiffs to remove your valuable belongings, and you could have to appear in court.
Discover your options today
Additional borrowing doesn’t have to be a headache, and with the right team on your side, it won’t be. Believe Loans is fully dedicated to giving you a range of cost-effective borrowing solutions and will find one that suits your needs.
All you need to do is pick up the phone, and then we’ll get the ball rolling. Please feel free to contact us today.