Additional mortgage borrowing

Releasing some of the available equity in your home, whether it’s for home improvements or to fund a sizeable purchase, is a relatively straightforward process.

It may seem obvious, but your property must be worth more than you originally paid for it. Here’s a typical calculation that explains this.

Let’s say you bought your home for £80,000 five years ago and it’s now worth £100,000. That means you have £20,000 equity, or collateral, tied up in your home.

Most mortgage providers will only lend up to 95% of the property value, which would mean you’d be in a position to borrow an additional £15,000. Here’s how it’s worked out:

• £100,000 property value x 95% = £95,000
• Outstanding mortgage = £80,000
• Available equity = £15,000

If the outstanding balance of your mortgage is higher than the value of your property, you're in ‘negative equity’. This means you won’t be able to secure additional borrowing against your home as there isn't enough equity to drawdown.

Your monthly repayments may increase. The more you borrow, the higher your new payments could be.

Your additional borrowing repayments will likely be debited separately to your mortgage payments. For example, if your current mortgage has ten years left and you choose to repay your additional borrowing over 5 years, you’ll have a repayment for each.

Please remember that any additional borrowing needs to be considered by your bank. They’ll decide whether you’re financially capable of making the increased repayments.

Many homeowners borrow additional funds for home improvements, because it's often cheaper than moving. There’s nothing to stop you from using the money for something else instead.

You cannot borrow for business related purposes, so be mindful you’ll need your lender to approve the reason for your additional borrowing.

If you're interested in discussing any aspect of additional mortgage borrowing, have a chat with your current mortgage provider. They’ll be happy to talk you through your available options.

You could be looking to release equity, borrow for improvements or to fund a major purchase.