The pros and cons of borrowing more through your mortgage

by Ash Ridge
Category: News

Looking for a way to fund a large expense? Whether you want to make home improvements or buy a new car, your property might provide an answer. 

Depending on your circumstances, you might be able to borrow more through your mortgage. This would increase the overall size of your mortgage and may affect your repayment or the mortgage term. Whether this is an option and the amount you can borrow will depend on a variety of factors, including:

  • How much equity you have in your property compared to when you initially took out the mortgage
  • Whether the loan will be used to increase the property’s value
  • Your financial circumstances.

Each lender sets its own criteria, so it may be useful to understand whether your current lender is likely to approve your application before you complete the paperwork. This is an area a mortgage adviser could help you with.

If you want to borrow money, read on to discover the pros and cons of doing so through a mortgage, rather than an alternative option. 

3 advantages of borrowing more through your mortgage

The interest rate may be lower

When borrowing through a mortgage, your home is used as collateral. As a result, there’s less risk to the lender.

So, compared to other forms of borrowing, like a home improvement loan or credit card, the interest rate you pay might be lower. You may save money and benefit from lower repayments by choosing to borrow additional money through your mortgage. 

You may have the potential to borrow a large sum

If your plan requires a large amount of money, borrowing through a mortgage may allow you to access significantly more than you could through alternatives. 

The amount you can borrow will depend on a range of factors, including your income and the value of your home. A mortgage adviser could help you assess how much you may be able to access and which lender might be right for you. 

You could spread the repayments across a long time frame

Traditionally, first-time buyers have taken out a mortgage with a 25-year term, and it’s not unusual to find mortgages with terms of 30 or even 40 years today. This is a benefit if you want to spread out your repayment over a longer time frame.

The longer the term, the lower your repayments would be. For example, if you borrowed £100,000 through a repayment mortgage with a 10-year term and an interest rate of 4.5%, the repayment would be £1,036. Extend the term to 15 years, and the repayment falls to £765. 

So, a longer term could help you manage your budget more effectively. 

3 disadvantages of borrowing more through your mortgage

You could lose your home

As the debt will be secured against your home, it’s essential you consider if you can meet the repayments before you proceed. If you default, you could risk losing your home. 

Longer terms could mean paying more interest

While the flexibility to pay over a longer mortgage term may be a positive for some homeowners, it could mean you pay more interest overall.

Imagine you’ve borrowed £100,000 with an interest rate of 4.5%, assuming the interest rate remains the same:

  • With a 10-year mortgage term, your repayment would be ÂŁ1,036 and you’d pay almost ÂŁ25,000 in interest 
  • With a 15-year mortgage term, your repayment would be ÂŁ765, and you’d pay almost ÂŁ38,000 in interest.

So, while you might benefit in the short term by choosing a longer time frame to make repayments, it could cost you thousands of pounds overall. 

Your regular outgoings will rise

If you intend to borrow more through your mortgage, your monthly outgoings will likely rise when you compare it to your repayments now.

Considering how your budget will adapt to the higher cost could help you feel more comfortable when increasing your financial commitments.

Remember, if you have a variable-rate mortgage, the interest rate you pay might change during the term too. So, calculating how an interest rate rise might affect you could be worthwhile. 

Do you want to review your mortgage borrowing? Get in touch

If you’d like to review your mortgage and understand if you could borrow more, please get in touch. We can answer your questions and search for a deal to suit your needs if you decide to go ahead. 

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

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