Borrowing more through your mortgage: pros and cons

Borrowing more through your mortgage: pros and cons

If you’re looking to fund a major expense—such as home improvements, consolidating certain debts, or helping with the costs of moving—borrowing more through your mortgage can be an option worth understanding.

In simple terms, it means increasing the amount you owe on your existing mortgage (or taking out additional borrowing alongside it). This can affect your monthly payments, the overall interest you pay, and sometimes the length of your mortgage term.

Whether you can borrow more, and how much, depends on a mix of factors, including:

• Your equity: how much of the property you effectively own outright compared with when you first took the mortgage.
• How the extra borrowing is used: some lenders may have preferences or restrictions.
• Your income and outgoings: lenders assess affordability based on your circumstances.
• Your mortgage details: your current deal, remaining term, and whether you’re looking to change the mortgage structure.

Because each lender applies its own criteria, it’s helpful to understand the trade-offs before you commit.

3 potential advantages of borrowing more through your mortgage

1) It may be cost-effective compared with unsecured borrowing

When borrowing is secured against your home, the lender has collateral. In some cases, this can make mortgage borrowing more cost-effective than unsecured credit such as personal loans or credit cards.

However, the exact outcome depends on your lender, your mortgage terms, and your personal circumstances.

2) Potential access to a larger amount of money

If the expense is substantial, mortgage borrowing may allow you to access more than you could with many other borrowing routes.

The amount available is typically influenced by:

• the value of the property
• the level of equity you have
• your affordability based on income and expenses

3) The ability to spread repayments over a longer period

Mortgage terms can sometimes be extended or restructured depending on the product and lender approach. Spreading repayments over a longer timeframe may help keep monthly payments more manageable.

However, a longer term can be a double-edged sword (more on that below).

3 potential disadvantages of borrowing more through your mortgage

1) Your home is at risk

A mortgage is secured against your property. If you can’t keep up with repayments, you may face serious consequences, including the risk of repossession.

Before increasing your borrowing, it’s important to be confident that your budget can handle the higher commitment.

2) You may pay more interest overall

Even if your monthly payment looks affordable, borrowing more and/or extending the term can increase the total interest paid over the life of the mortgage.

A useful way to think about it is:

• Shorter term: often higher monthly payments, but potentially less interest overall.
• Longer term: often lower monthly payments, but potentially more interest overall.

3) Your monthly outgoings will likely rise

Borrowing more generally increases your monthly payments (unless you restructure in a way that reduces the payment through term changes or other adjustments).

It’s worth considering how your household budget might cope with:

• everyday living costs
• any future changes in income or expenses
• potential interest rate changes if your mortgage rate is variable or can change

Key factors to consider before you increase your mortgage

Equity and property value

If your property has increased in value since you bought, you may have more equity available. Lenders often look at the loan-to-value (LTV) position when assessing additional borrowing.

Affordability and repayment capacity

Even if you have equity, lenders will still assess whether the extra borrowing is affordable. That usually includes reviewing your income, regular commitments, and existing debts.

Mortgage structure and repayment type

Your current mortgage type matters. For example, whether you’re on a repayment basis or another structure can affect how the balance changes over time.

Interest rate type

If your mortgage is on a fixed rate, the cost of borrowing more may depend on what happens when you move onto a new rate. If you’re on a variable rate, the cost may change over time.

The purpose of the borrowing

Some lenders may have restrictions or preferences about how additional borrowing is used. Understanding the lender’s approach can help you avoid wasted time and reduce the risk of delays.

A practical way to weigh up the decision

Before deciding to borrow more, compare the impact in two ways:

1. Monthly affordability: what will your payments be, and how comfortable is that within your budget?
2. Total cost over time: how much interest might you pay overall, and how does that compare with alternatives?

It’s also sensible to stress-test your plan. For example, consider what happens if interest rates rise, if your income changes, or if you face unexpected expenses.

When borrowing more through your mortgage may be a sensible fit

Borrowing more can be more appealing when:

• the expense is significant and mortgage borrowing is proportionate
• you’re confident you can comfortably meet the higher repayments
• you understand how the extra borrowing affects the total cost
• you’ve considered whether extending the term is the right trade-off for your situation

When to pause and explore alternatives

It may be worth reconsidering if:

• your budget is already tight and the additional payments could strain finances
• you’re relying on future income that isn’t guaranteed
• you haven’t assessed the total interest cost of borrowing more
• you’re unsure how rate changes could affect your repayments

Important notes

• This guide is for general information only and does not constitute financial advice.
• Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.