If you are thinking about topping up your mortgage in order to consolidate other debts, read our information on consolidating debts into your mortgage.
If you have equity in your home, you may be able to increase your existing mortgage to do work such as home improvements, extensions or to cover other large expenses.
The extra amount you can borrow depends on how much your home is worth as well as on your ability to repay the new mortgage. Most lenders will extend your mortgage up to about 80% of the current value of your property, provided they are satisfied that you can afford the increased repayments and you have not had any problems keeping up with your repayments in the past. Your lender will want an up-to-date valuation of your home.
If you decide to top up your mortgage, make sure that the mortgage term is suitable for the purpose of the debt. For instance, if you are borrowing the extra money to buy a car, it makes sense to repay this portion of the mortgage over a shorter term. You don’t want to be paying for the same car in 15 years time.
If you decide to increase your mortgage, you will usually have to pay:
- a fee to get a valuation
- legal fees and other charges
- a fee if you are breaking an existing fixed-rate mortgage
- extra mortgage protection insurance to cover the extra loan amount
Some providers will also charge you an administration fee for any changes to the original terms of your mortgage so you should check this with your provider first and try to negotiate on the fee.
Apart from fees and legal costs, you will also pay more interest if you increase your mortgage. You also face an increased risk of negative equity .