If your property has increased in value, you may be able to borrow additional funds against your built-up equity — either through a further advance from your existing lender or a second charge mortgage from another. Contractors commonly use this to fund home improvements, consolidate debt, or build a deposit for an investment property, with rates remaining competitive as the borrowing is secured against your home.
A further advance is additional borrowing from your existing mortgage lender, secured on the same property as your current mortgage. It is not a separate product — it sits alongside your existing mortgage and is typically assessed and charged at a separate rate from your original deal.
The amount you can borrow depends on the equity in your property and your income. For contractors, the further advance affordability assessment will typically use day rate annualisation if your existing lender already accepts this method, or may require updated income documentation if criteria have changed since your original application.
A second charge mortgage is a separate loan secured against your property, arranged through a different lender from your first mortgage. The second charge lender takes a secondary charge on the property and is repaid after the first mortgage in the event of a sale.
Second charge mortgages are useful when your first mortgage lender declines a further advance, when the further advance rate offered is uncompetitive, or when you are in a fixed rate period and do not want to risk early repayment charges on your first mortgage by remortgaging.
A further advance or second charge mortgage can be used for a wide range of legal purposes. Here are some of the most common reasons contractors access additional funds from their property’s equity.
Your existing lender will carry out an affordability assessment for a further advance, applying their current income criteria. For contractors, this means they will assess your income using whatever method they apply to contractor applicants — which may or may not be day rate annualisation.
If your existing lender does not accept day rate income, a second charge from a specialist lender may produce better terms. We compare both options and recommend the approach that gives you the best access to additional funds at the lowest cost.
Further advances typically involve a new valuation of the property and may incur a product fee.
Second charge mortgages carry higher rates than first charge products generally.
Still Worth Comparing: Despite the higher rate, they can still be competitive against unsecured borrowing.
The maximum further advance depends on your property's current value, your outstanding mortgage balance and your income. Most lenders will advance up to 85% to 90% of the property's current value in total. Your day rate income is used to assess the additional affordability of the further advance payment alongside your existing mortgage commitment.
This depends on your existing lender and when they last assessed your income. If a further advance is not available due to your contract situation, a second charge from a specialist lender who will assess your average income over the past twelve months may be an alternative.
No — a second charge is a separate loan secured on the property, sitting behind your first mortgage. A remortgage replaces your existing first mortgage entirely. Second charges are useful when you want to access equity without disturbing your existing mortgage.
A further advance from your existing lender can typically be arranged within two to four weeks. A second charge mortgage from a specialist lender can sometimes be arranged more quickly, in ten to fifteen working days.
A further advance is typically charged at a separate rate from your original mortgage. It does not affect the rate on your existing mortgage balance unless you are combining both into a single remortgage product.