This guide explores your key options for getting a “top-up” loan with your current lender (which might lead to a split mortgage with different rates) or remortgaging the entire amount with a different lender for potentially better overall terms. We’ll also cover the crucial affordability checks lenders perform and how your loan-to-value (LTV) can impact available rates. Discover the right path for your next home move with IMC Mortgage Brokers.

What if you want to borrow more on your mortgage?

It’ a common scenario for home movers: your next property might simply be more expensive than your current one, requiring a higher loan amount to bridge the gap between your equity and the new property’s price. If you’re looking to borrow more on your mortgage when moving, you generally have a few distinct paths to explore, each with its own set of considerations.

Here are common scenarios where you might need to increase your mortgage borrowing:

• Purchasing a larger or more expensive property: This is the most frequent reason, requiring a higher loan amount to bridge the gap between your equity and the new property’s price.
• Funding renovations or home improvements: You might identify a property with great potential but needs work, or plan to extend your new home. Adding these costs to your mortgage can be a cost-effective way to finance them.

When you’re looking to borrow more on your mortgage when moving, you generally have a few distinct paths to explore, each with its own set of considerations.

Option 1: A “top-up” loan with your existing lender

If your current mortgage product is portable (meaning you can transfer it to your new property), your existing lender might offer you a “top-up” loan for the additional amount you need to borrow.

• How it works: You effectively port your existing mortgage deal (for the original amount) to your new property, and then your current lender provides an additional loan to cover the difference. This often results in a “split mortgage”.
• Potential for different rates: Crucially, the “top-up” portion of your loan will likely be on a new, separate mortgage product with your current lender’s prevailing interest rates. This means you could end up with two parts to your mortgage, potentially with different interest rates, repayment terms, and even end dates.
• Advantages:
  • Convenience: You’re already with this lender, which could streamline some processes.
  • Avoids Early Repayment Charges (ERCs) on the ported amount: If you port your existing mortgage, you typically avoid the ERCs that would apply if you paid it off early.
• Disadvantages:
  • Limited choice: You’re restricted to your current lender’s product range for the additional borrowing, which might not be the most competitive available in the wider market.
  • Complexity of a split mortgage: Managing two different mortgage parts can add complexity to your financial planning.

Option 2: Remortgaging for the full new amount

Instead of porting, you could choose to remortgage for the full new amount required for your new home. This means taking out a completely new mortgage product, either with your current lender or, more often, with a new lender entirely.

• How it works: You apply for a single new mortgage that covers the total borrowing you need for your new property. When the new mortgage completes, it pays off your old mortgage (if with a different lender) and funds the purchase of your new home.
• Advantages:
  • Whole-of-market choice: Working with a mortgage broker like us allows you to compare deals from a vast range of lenders, potentially finding the most competitive rate and most suitable terms for your entire new mortgage amount.
  • Simplicity of one loan: You’ll have just one mortgage product, one rate, and one repayment schedule to manage.
  • Tailored solution: A new mortgage can be precisely tailored to your current financial situation and future plans.
• Disadvantages:
  • Potential Early Repayment Charges (ERCs): If you’re currently in a fixed or tracker deal with your existing mortgage, taking out a new mortgage with a different lender will mean repaying your current mortgage early, potentially triggering significant ERCs. Your broker can help you assess if this cost outweighs the benefits of a new, better deal.
  • Full re-application process: It’s a comprehensive application, though an experienced broker can make this feel seamless.

Option 3: Second charge mortgages (for post-move borrowing)

While less common for the initial purchase itself, a second charge mortgage is a way to increase your mortgage amount after you’ve moved into your new home. This is essentially a separate loan secured against your property, in addition to your main, existing mortgage.

• How it works: It’s a standalone loan, usually from a different lender than your main mortgage provider. It sits ‘behind’ your primary mortgage in terms of repayment priority.
• When it’s applicable: This option is more typically used for substantial home improvements or debt consolidation after you have settled into your new home, rather than for the initial purchase price increase itself.
• Considerations: Interest rates on second charge mortgages can sometimes be higher than main mortgage rates, and it adds another layer of financial commitment.

Affordability reassessments for increased borrowing

Regardless of whether you want to borrow more on your mortgage or a remortgage completely, any lender will conduct a thorough affordability reassessment before agreeing to an increased loan amount. This means they will:

• Review your income and outgoings: They’ll meticulously check your current earnings, fixed expenses, and debt commitments.
• Perform new credit checks: Your up-to-date credit history will be reviewed.
• Apply current lending criteria: Lenders’ rules about how much they are willing to lend change over time. What you qualified for previously might differ from what you qualify for now.

This reassessment ensures you can comfortably afford the higher monthly repayments associated with your increased mortgage.

Impact on loan-to-value (LTV) and available rates

When you increase your mortgage amount for a home move, it directly impacts your LTV. LTV is the size of your mortgage compared to the value of your property, expressed as a percentage.

• Higher LTV, potentially higher rates: If your increased borrowing means you have a higher LTV (e.g., you’re borrowing 90% of the property’s value instead of 80%), you might find that the available interest rates are slightly higher. Lenders often reserve their most competitive rates for borrowers with lower LTVs (larger deposits/equity).
• Your broker’s role: A mortgage broker can help you understand how your new LTV might affect the rates available to you and guide you towards the best value products for your situation.

Ready to explore the possibilities of increasing your mortgage for your upcoming move? Contact IMC Mortgage Brokers today for a free, no-obligation consultation. We’re here to help you plan your finances with clarity and optimism, fully preparing you for your new home.