That dream kitchen extension, the loft conversion you’ve always wanted, or a complete garden makeover – these projects can significantly enhance your living space and add value to your property. However, they often come with a hefty price tag. A further advance or remortgage can provide the necessary funds, as a solution for home improvement projects.
Further Advance vs. Full Remortgage: Which is Right for You?
When you need to borrow more money against your property, you’ll likely encounter two options: a further advance or a full remortgage. While both achieve the goal of releasing equity, they operate differently and suit different circumstances. Let’s break down the key distinctions to help you decide which path is best for you.
Further Advance: Staying Put with Your Current Lender
A further advance involves borrowing additional funds from your existing mortgage lender, secured against your property. It’s essentially an extension of your current mortgage.
Pros:
- Simplicity: Potentially quicker and less complex than a full remortgage.
- Potentially lower fees: May incur fewer fees than switching lenders.
- Maintains existing rate: If your existing mortgage is on a lower fixed rate, that remains in place for the duration of the agreed term, you only pay the higher rate on the further advance.
- Speed: can often be arranged quicker than a full remortgage as you usually avoid having to use a solicitor.
Cons:
- Limited options: You’re restricted to your current lender’s offerings.
- Potentially higher rates: The interest rate on the further advance might be higher than available rates elsewhere.
- Lender criteria: You must meet your current lender’s criteria for a further advance.
- Not always available: Lenders don’t always offer further advances.
Full Remortgage: A Fresh Start with a New Lender
A full remortgage involves taking out a new mortgage with a different lender, replacing your existing one. This allows you to borrow the additional funds while potentially securing a better overall deal.
Pros:
- Access to wider market: You can shop around for the best rates and deals.
- Potential for better rates: You might find a lower interest rate.
- Opportunity to change terms: You can renegotiate your mortgage terms, like switching to repayment mortgage
Cons:
- More complex process: Requires a full mortgage application, including valuations and legal work.
- Higher fees: Can involve arrangement fees, valuation fees, and legal fees.
- Longer processing time: Takes longer to complete than a further advance.
- Early repayment charges: if your in the middle of a fixed product with your current lender, you may incur hefty early repayment charges from your mortgage provider.
When to Choose Which:
Further Advance:
- If you need a relatively small amount of additional funds – often lenders will allow you to take out anything from £5k.
- If you want a quick and simple process.
- If your current lender offers competitive rates.
- If you wish to avoid paying early repayment charges on your current mortgage.
Full Remortgage:
- If you need a substantial amount of additional funds.
- If you want to secure the best possible interest rate.
- If you want to renegotiate your mortgage terms.
- If your current mortgage deal is ending, or if early repayment charges are minimal.
Key Takeaway:
Carefully weigh the pros and cons of each option based on your individual circumstances. Consider the amount you need to borrow, your financial situation, and the potential savings or costs involved. Always seek professional financial advice to ensure you make an informed decision. Our advisers will help you to determine what is affordable. Remember, your home is at risk if you do not keep up repayments on your mortgage.
Our mortgage team are here to help you navigate the options available so do get in touch to discuss your needs.
