Remortgage vs Further Advance

What Is a Further Advance?

A further advance is additional borrowing from your existing mortgage lender, secured against your property. It is a separate loan from your main mortgage, though it is administered by the same lender and secured with the same first charge on your property.

Here is how it typically works:

• You apply to your existing lender: You contact your current mortgage provider and request additional borrowing. They will assess your application based on their current lending criteria.
• Affordability and credit checks: The lender will carry out a fresh affordability assessment and credit check to ensure you can manage the additional repayments alongside your existing mortgage.
• Valuation: A valuation of your property may be required to confirm there is sufficient equity to support the extra borrowing.
• Separate rate and term: The further advance is usually offered at a different interest rate from your existing mortgage and may have a different repayment term. You end up with two loans from the same lender, each with its own rate and conditions.

Key features of a further advance:

• Your existing mortgage remains unchanged — you keep your current rate, term, and conditions.
• The additional borrowing sits alongside your main mortgage with the same lender.
• There are no early repayment charges on your existing deal because you are not changing it.
• The process can be quicker and simpler than a full remortgage because you are already a customer.
• Not all lenders offer further advances, and those that do may not offer the most competitive rates.

A further advance can be a convenient option, but it is important to compare the rate offered against what is available through remortgaging to ensure you are getting a competitive deal.

How Does a Further Advance Compare to Remortgaging?

To make an informed decision, it helps to see both options compared side by side across the key factors that matter most.

Rate comparison is key:

The rate your existing lender offers on a further advance may be higher or lower than what you could achieve by remortgaging on the open market. Because you are limited to a single lender with a further advance, you lose the competitive benefit of shopping around. However, when you factor in the costs of remortgaging — ERCs, valuation fees, legal fees — a slightly higher further advance rate may still be cheaper overall.

Two payments vs one:

With a further advance, you will have two separate payments to the same lender: one for your original mortgage and one for the additional borrowing. With a remortgage, everything is consolidated into a single loan with one payment. Some people prefer the simplicity of a single payment, while others are happy to manage two.

When a Further Advance Makes More Sense

A further advance is often the better option in the following circumstances:

You are in a competitive fixed-rate deal with high ERCs:

If your existing mortgage rate is low and you have significant early repayment charges remaining, the cost of breaking the deal to remortgage could be substantial. A further advance lets you access additional funds without disturbing your existing rate. Even if the further advance rate is slightly higher, you avoid the ERCs and retain your competitive first mortgage rate.

You need to borrow a relatively small amount:

For smaller amounts, the fixed costs of remortgaging (valuation, legal fees, arrangement fees) can be disproportionately high. A further advance often has lower set-up costs, making it more economical for modest borrowing.

You want a quick and simple process:

Because you are already a customer, your lender has much of your information on file. The process can be quicker and involve less paperwork than a full remortgage with a new provider.

You are close to the end of your mortgage term:

If you are nearing the end of your existing mortgage, remortgaging to a new long-term deal may not make sense. A further advance for the specific amount you need can be a more targeted solution.

Your circumstances make remortgaging difficult:

If your income has changed, your credit has been affected, or your property has unusual characteristics, you may struggle to pass a new lender's criteria. Your existing lender already knows you and may apply different criteria for existing customers requesting a further advance.

When Remortgaging Makes More Sense

Remortgaging is often the preferred option when the broader market offers better value than your existing lender's further advance rate. It tends to be the right choice in these scenarios:

Your current deal has ended:

If your fixed rate, tracker, or discount period has expired and you have moved onto the SVR, remortgaging is the natural next step. You can secure a new competitive rate on your full mortgage balance while also raising additional funds — all in one go.

The further advance rate is uncompetitive:

Not all lenders offer attractive rates on further advances. If your lender's quote is significantly above what you could achieve through remortgaging, switching to a new deal may save you a considerable amount, particularly over a longer term.

You want to borrow a large amount:

For larger sums, the interest rate becomes more impactful. A small rate difference on a large loan amount translates into significant savings over the term. Remortgaging to access the most competitive rate on the full combined amount usually makes more financial sense for bigger borrowing.

You want to consolidate into a single payment:

If managing two separate payments does not appeal to you, remortgaging consolidates everything into one mortgage with one rate and one monthly payment. This can simplify your finances and make budgeting easier.

You want to change other aspects of your mortgage:

Remortgaging gives you the opportunity to restructure your mortgage entirely — for example, changing the term, switching between repayment and interest-only, or moving from a variable rate to a fixed rate. A further advance only adds to your existing arrangement without changing it.

As always, the best approach is to compare both options using your actual figures. A whole-of-market broker can request a further advance quote from your existing lender and compare it against remortgage deals from the wider market, giving you a clear picture of which route is cheaper.

Costs and Fees: A Detailed Breakdown

Understanding the fees associated with each option is essential for making an accurate comparison. Here is what to expect:

Further advance costs:

• Arrangement fee: Some lenders charge an arrangement or product fee on the further advance. This varies by lender and may be added to the loan.
• Valuation fee: Your lender may require an updated valuation, though some use desktop valuations or waive the fee for existing customers.
• Legal fees: Further advances from the same first charge lender typically do not require a solicitor, which can save several hundred pounds.
• ERCs on existing mortgage: None. Your existing deal remains unchanged.

Remortgage costs:

• Early repayment charges: If you are still within a fixed or discounted period, ERCs can range from 1% to 5% of the outstanding balance. On a £200,000 mortgage, a 3% ERC would cost £6,000.
• Arrangement fee: Many remortgage deals carry a product fee, though fee-free options are widely available. Fees typically range from £0 to £1,500.
• Valuation fee: Often free with remortgage deals, particularly from high street lenders.
• Legal fees: Many remortgage packages include free legal work. Otherwise, expect to pay £300 to £800 for conveyancing.
• Exit fee: Your existing lender may charge a small administrative exit fee (typically £50 to £300) when you leave.

To make a fair comparison, add up all the costs for each option and consider them alongside the total interest payable over the loan term. A broker can prepare a detailed cost analysis showing the true total cost of each route, helping you make an informed decision.

How to Decide: Practical Steps

Here is a step-by-step approach to help you decide between a further advance and a remortgage:

Step 1: Check your current mortgage terms

Find out your current interest rate, when the deal period ends, and whether any ERCs apply. This information is on your mortgage offer or available from your lender. If you have high ERCs remaining, a further advance is likely to be more cost-effective.

Step 2: Request a further advance quote

Contact your existing lender and ask for a quote for the amount you wish to borrow. Ask about the interest rate, any fees, and the terms available. This gives you a baseline to compare against remortgage options.

Step 3: Compare remortgage deals

Speak to a whole-of-market mortgage broker who can search the entire market for remortgage deals that suit your circumstances. They can factor in all costs — including any ERCs — to show you the true cost of remortgaging versus the further advance.

Step 4: Consider the total cost, not just the rate

A lower rate does not always mean a cheaper deal once all fees are factored in. Ask your broker to calculate the total cost of each option over the loan term, including all fees and charges.

Step 5: Think about your future plans

If your existing deal is ending soon, it may make sense to wait and remortgage at that point rather than taking a further advance now. If you are mid-way through a long fixed term, a further advance may be the pragmatic choice.

Step 6: Take advice

Whether you choose a further advance or a remortgage, ensure you are making the decision with the benefit of professional advice. A qualified mortgage adviser can identify the most cost-effective option and handle the application process on your behalf.