If you’ve ever borrowed against your mortgage, then you know: it’s a shady business. The whole thing is ripe with the possibility for scams and wild deals, and there’s hardly anyone who will tell you otherwise. But we’re here to change that;  you’ll find many lenders who have good deals in the market.

Because we know the inner workings of remortgaging —we understand how the sausage gets made, so to speak—we can help steer you in the direction of some lenders who will work with you, not against you.

What does it mean to borrow against an existing mortgage?

To borrow against an existing mortgage means to take out a new loan — usually at a higher interest rate — using your house as collateral. Like any other loan, you’ll need credit and income sufficient to qualify for the new loan. The amount you can borrow depends on how much equity you have in your home.

Home equity is the difference between what you owe on your mortgage and what your home is currently worth. If your home is worth $200,000 and you owe $100,000 on your mortgage, you have $100,000 in home equity.

How much of that equity you can tap into depends on the lender and the type of loan. Some lenders will let you take out up to 100% of your available equity, while others cap the amount at 80%, 90%, or even lower. You may be able to borrow against your home’s equity even if it’s less than 20%, but most lenders won’t let you borrow amounts equal to or greater than that threshold.

How do you start the process?

Borrowing against your existing mortgage is an excellent idea if you’ve paid down enough of the loan for an additional mortgage to be worth it. Here’s how to go about doing it.

Know your financial situation

You must know precisely how much money you make and what kind of debt you have before taking out another loan. Make sure you’re making more than enough money to pay off both loans and that your debt-to-income ratio is in good shape.

Know how much money you want to borrow

Now this part is easy! Just look at how much equity you’ve built up in your home and figure out how much of it you want to use as collateral for a second loan.

Find a lender

You can use the same bank or lender you used for your first home loan, but it’s worth shopping around to get alternative mortgage lenders who have good interest rates since this will affect your monthly payments over the life of the new loan. You can get pre-approved by giving them all of the critical financial information listed above, but this does not mean you have to accept their offer, so feel free to shop for better options.

In conclusion

Borrowing against an existing mortgage is a great way to take advantage of the equity you’ve built up in your home. Whether you want a new car, some home improvements, or just some extra cash to pay off your credit card debt, a second mortgage can be the answer.

It’s important to remember that this is a loan that needs to be paid back and if you fail to make your monthly payments, it could result in foreclosure on your home. So make sure you are comfortable with the loan terms before you sign on the dotted line.

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