How to borrow more on my mortgage

How to borrow more on my mortgage

There are plenty of resources available, which explain how to secure a competitive home loan. But what if you already have a mortgage, and simply want to increase your limit further?

This blog explains how to go about topping up your mortgage, and the benefits of doing so.

Why do people increase their mortgage-limit?

People choose to borrow more on their mortgage for many different reasons.

Despite this, we’ve noticed that many of our clients seek to increase their mortgage-limit for the following core reasons:

  • To finish renovations on a home, in order to increase the overall value of a property.
  • To consolidate existing debt.
  • To pay off a new vehicle.
  • To pay school fees.
  • To pay for a big family holiday or major life goal.

What are the benefits?

When it comes to securing any kind of loan, benefits only exist when a person has a clear intention of why and how they will use the extra funds.

For example, you may know that if those minor renovations are completed, you will then be able to rent that extra room and make a steady income from rental payments.

With this in mind, the clearest benefit for borrowers seeking to increase their mortgage-limit is cash flow.

Paying of an additional amount on a mortgage allows an individual to achieve their goal, whether its finishing renovations or paying off school fees, without having to sacrifice immediate financial hardship.

If your mortgage top-up is sensible and within your financial capabilities, then it will be easier to achieve those other important goals you have set for you and your family.

How much can I get?

Lenders typically place some kind of a limit on mortgage top-ups. Many have a $100,000 cap, while others stick to around $50,000.

There are also some lenders who have no limit on additional mortgage lending at all.

Your lender will assess a number of factors before deciding whether you are eligible for a mortgage increase. Some of these factors include:

  • The amount of equity you already have.
  • Your existing income and liabilities.
  • An updated valuation of your property.

With many lenders, applying for a mortgage increase is a lot like applying for a home loan for the first time.

Of course, the exact criteria for the loan increase will depend heavily on the lender you are applying to.

When is the best time to ask for a mortgage increase?

There is no perfect time to apply for a mortgage increase, but you are likely to have greater success if you wait 1 year or more until making the move.

This is especially true if you have purchased a property with a deposit of less than 20%.

Should I increase my mortgage?

If you’re looking to increase the value of your property through renovations or other means, and have a clear understanding of the return on investment you can expect, then asking for more funds does make sense.

On the other hand, if you’re seeking to use the extra funds for something like a big family holiday, it may be better to hold off.

The extra interest you’ll be paying will lengthen the term of your loan, and place a greater burden on you in the long term.

It is always vital to consider whether the item or asset you are purchasing is worth the extra time, cost and interest that will be added to your loan.

Need help increasing your mortgage limit?

Our mortgage brokers can assist you with the process of topping up your mortgage. Contact our office to find a Capita broker in your area.