Further Advances

Building societies lend, in general, only for the purpose of enabling their members (investors or borrowers) to buy their own homes or to move to another home. Building society mortgages are not available for facilitating the acquisition of a holiday home or for the financing of the purchase of any asset other than a private residence.

It is, nevertheless, normal for an existing borrowing member to be allowed to increase his loan for any purpose that improves the value of the property. For example, further advances (additional lending) may be made for the purpose of installing central heating, building an extension or converting a loft to a room.

In times of mortgage shortage it may be difficult to obtain a further advance, and most societies in any case expect an applicant to put up some money himself. Further advances up to 80% of the cost of improvements are quite common.

Repairs and maintenance

A house owner is expected to keep his house in a good state of repair and condition out of his income. A further advance for making good damage, or wear and tear, or for decorating, is not generally available.

However, where an old property has been purchased on a building society mortgage, and in course of time it is decided that it needs reroofing, a further advance may still be possible if it can be shown that the work will enhance the value of the property, making it a better house than when it was first bought.

Top-up Mortgages

When the general supply of mortgage funds is insufficient to meet in full all demands for mortgages from qualified would-be borrowers, societies are obliged to ration their funds. Thus, in recent years it has become common to find that a society is restricting all new mortgages to a top figure of £13,000, £17,000 or £19,000, even though the value of the property and the income status of the applicant would justify lending beyond those figures.

1. With an endowment mortgage the building society does not gain the advantage in the interest rate of the margin between agreed rate and true rate... see: Top-up Mortgages

Personal And Business Finance 2018

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