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Difference between remortgaging and a further advance when releasing equity


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Hello everyone,

Is there a difference between a re-mortgage and a further advance when releasing equity from a property? Is one favourable over the other? I am looking to release equity to invest in an investment property. 

Thanks for any input in advance!

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Hi Natalie,

Further to the previous posts, yes, there are some differences:

- further advance - taking extra money from the existing lender

- remortgage - taking money from a new lender, which money will repay the existing lender and possibly release equity, so you can use it for home improvement or as deposit for a new property

Referring back to one of your previous questions, if you're thinking of taking the extra money from the property while also changing from residential mortgage to BTL mortgage, then it's a definite remortgage, not a further advance matter, as you're changing the mortgage type.

However, when you don't change the purpose of the mortgage, the decision about further advance v remortgage is based on cost. If you are locked into a deal, then you're likely to have an early repayment charge, so changing lenders could cost you thousands of pounds. Instead, it may be cheaper to take a further advance from the existing lender, even if the rate is higher than what you could get from another lender.

Hope the above makes sense and answers your question.

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2 hours ago, lilla d said:

Hi Natalie,

Further to the previous posts, yes, there are some differences:

- further advance - taking extra money from the existing lender

- remortgage - taking money from a new lender, which money will repay the existing lender and possibly release equity, so you can use it for home improvement or as deposit for a new property

Referring back to one of your previous questions, if you're thinking of taking the extra money from the property while also changing from residential mortgage to BTL mortgage, then it's a definite remortgage, not a further advance matter, as you're changing the mortgage type.

However, when you don't change the purpose of the mortgage, the decision about further advance v remortgage is based on cost. If you are locked into a deal, then you're likely to have an early repayment charge, so changing lenders could cost you thousands of pounds. Instead, it may be cheaper to take a further advance from the existing lender, even if the rate is higher than what you could get from another lender.

Hope the above makes sense and answers your question.

Thank you very much for explaining the difference! Regarding further advances, how much are people usually able to borrow with the existing lender?

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16 hours ago, scotty d said:

Hi Natalie,

It depends on the lender. Normally around 85% LTV as a guide. The lender may also charge a valuation fee. 

KR

Scott

Thank you Scotty, when people ask their lenders for a further advance - do the lenders usually want to know what the money will be used towards? I've heard a few people say that lenders sometimes don't like it if the further advance is used for property investment?

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I imagine they would prefer it if people used it for home improvement and increased the value of the asset but they’re usually happy for other uses such as property investment. 
 

The issue at the moment is the almost daily changes in products and underwriting criteria. What you could have borrowed last week might be greatly reduced this week. 

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