Can you increase your mortgage?
The mortgage does not solve all the problems of the future owner of the property. It often happens that the borrower does not have enough funds to finish his own apartment or, for example, to buy furniture. Then the question arises: can the mortgage capital be increased? In today’s article we will try to answer this question.
Credit capital – what is it at all?
The loan capital is nothing else but the loan amount for which we applied to the bank. For example: we buy a flat for USD 300,000, own contribution we have USD 100,000, so we take out a loan for USD 200,000. And that’s the loan capital. Of course, after adding all bank costs, the total amount to be paid will be greater than the principal loan. However, no banks grant mortgage loans for free.
The loan capital is the main determinant of the monthly installments that the borrower will have to pay throughout the entire repayment period. This capital, divided by the total number of installments, constitutes the capital part of each of them. In addition, the loan installments also consist of the interest portion – the interest and other loan costs calculated accordingly.
Importantly, loan capital is usually not subject to any change. In practice, however, some banks agree to attach an annex to the loan agreement, under which we “top up” the loan capital for further funds. This option also exists in the case of a mortgage – although there are some restrictions and regulations that make it difficult to increase funding.
How to increase your mortgage capital?
The overriding principle for increasing mortgage capital is as follows: raising the loan amount is only possible for the original purpose. This means that if we took out a loan to build a house, we can ask you to recapitalize our loan due to the increase in construction costs. However, we cannot use these funds to buy furniture or electronics.
If we need additional funds to finance needs other than those arising from the original loan agreement, we should take out a new, separate loan. For example: a renovation loan with a mortgage security. However, it is worth remembering that each subsequent commitment reduces our creditworthiness. Therefore, it may happen that the bank refuses to grant us a renovation loan.
Refinancing your loan is another way to get extra money. It involves taking out a new loan to cover the original mortgage (and possibly other costs for which we need additional funds).
For example: we already have a mortgage for USD 200,000, the cost of granting this loan is USD 30,000, and we need an additional 30,000 to finish the purchased property. That is why we apply for a refinancing loan of USD 260,000. Thanks to the financing we will pay back the original mortgage debt and gain additional funds for renovation.