What is a further advance?
A further advance is additional borrowing from your existing mortgage lender on top of your current mortgage. Rather than remortgaging to a new lender, you stay with your current lender and simply increase the amount you owe. The additional funds can be used for various purposes, including paying off other debts.
Not all lenders offer further advances, and those that do have varying criteria for what the funds can be used for. Some are happy to advance funds for debt consolidation, while others restrict further advances to home improvements or property purchases only.
Will your lender agree to add debt?
Whether your lender will allow you to add debt to your mortgage depends on several factors.
Lender policy on debt consolidation
Some major UK mortgage lenders are open to debt consolidation through further advances, while others are not. Lender policies change regularly, so the most reliable way to find out is to ask your lender directly or, more effectively, to consult a mortgage broker who knows current lender criteria across the market.
Your equity position
Even if your lender offers further advances for debt consolidation, you need sufficient equity. The combined total of your existing mortgage plus the further advance must not exceed the lender's maximum LTV, which is typically 85% to 90% for debt consolidation purposes.
Affordability
Your lender will reassess your affordability for the increased mortgage amount. This involves a full income and expenditure review, including stress testing at higher interest rates. If your financial circumstances have changed since you took out the original mortgage, this could affect whether the further advance is approved.
Your credit history
Even as an existing customer, your lender will run a fresh credit check. If your credit history has deteriorated since you took out the mortgage, this could lead to the further advance being declined, even if the lender is willing in principle.
Further advance vs remortgage: key differences
A further advance and a remortgage achieve a similar outcome but work differently in practice.
- Further advance: You stay with your existing lender. Your original mortgage continues on its current terms, and the additional borrowing may be on a different rate and term. You end up with two sub-accounts with the same lender.
- Remortgage: You switch to a new lender who pays off your existing mortgage and provides a new, larger mortgage. Everything is consolidated into a single product with a single rate and term.
A further advance is typically quicker and cheaper to arrange because there are no legal fees for switching lenders and no valuation fee in many cases. However, the rate on the further advance may be higher than what you could achieve by remortgaging to a new lender on a competitive deal.
The rate on a further advance
One important consideration is that the interest rate on a further advance is often higher than the rate on your original mortgage. While your existing mortgage might be on a competitive fixed rate, the further advance will be priced based on current rates and your current risk profile. In some cases, the rate on a further advance can be significantly higher than what a new lender would offer through a remortgage.
Your broker should compare the total cost of a further advance, including the rate on the additional borrowing, against a full remortgage to a new lender. In some cases, the savings from avoiding ERCs and fees make a further advance the better option despite the higher rate. In other cases, a full remortgage to a more competitive lender is clearly cheaper overall.
What if your lender says no?
If your existing lender declines a further advance for debt consolidation, you have several alternative options.
Remortgage to a new lender
This is the most common alternative. A new lender replaces your existing mortgage with a larger one, and the additional funds are used to clear your debts. This gives you access to the whole market rather than being limited to your current lender's products and criteria.
Second charge mortgage
A second charge mortgage from a different lender sits alongside your existing mortgage. This is particularly useful if you are on a competitive rate with your current lender and do not want to disturb it, or if your lender has declined a further advance but another lender is willing to provide a second charge.
Debt consolidation personal loan
An unsecured personal loan keeps your property out of the equation entirely. Rates are higher but the debt remains unsecured, and terms are shorter, potentially reducing total interest costs.
The process of requesting a further advance
- Contact your lender: Ask whether they offer further advances for debt consolidation and what the current rates and criteria are.
- Provide financial information: The lender will request details of your income, expenditure, and the debts you want to consolidate.
- Credit check and affordability assessment: A fresh credit search and full affordability assessment will be conducted.
- Valuation: The lender may require an updated property valuation, although some accept desktop valuations or automated valuations for existing customers.
- Offer and completion: If approved, the lender issues a further advance offer. Legal work is usually simpler than a full remortgage, and funds can sometimes be released within a few weeks.
Should you go directly to your lender?
While going directly to your lender is straightforward, it limits your options to what that single lender can offer. A mortgage broker can compare a further advance from your current lender against remortgage options from the whole market and second charge mortgage options, ensuring you get the most cost-effective solution for your circumstances.
A broker can also present your application more effectively, particularly if your circumstances are not straightforward. This can make the difference between approval and decline, especially if your credit history or income situation has changed since you took out your original mortgage.
Getting expert guidance
Nesto matches you with an FCA-regulated debt consolidation broker who will assess all available options, including further advances, remortgages, and second charge mortgages. The service is free with no obligation. Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.