Looking to free up the cash locked up in your home? A top up mortgage may be what you are looking for, allowing you to release some of the equity tied up in your home.
No matter what you want the money for, our tips will give you the inside track on whether a mortgage top up is right for you and the best way to go about it.
By switching mortgage to a better rate you can often borrow more and still pay less in repayments per month. That’s why the the number of people taking out a mortgage top up, also sometimes known as releasing equity, is on the rise.
A mortgage top up is simply re-mortgaging your home for more than your current outstanding mortgage to allow you to access the amount you have ‘topped up’ by to spend now.
Use our mortgage top up calculator to see what your new monthly repayment will be. Select ‘new mortgage’ to see if your repayments on the topped up amount are less than you are paying today.
If you’re over 60 there are also some other equity release options know as a home reversion equity release or a lifetime loan equity release, which will also allow you to stay put and release some cash.
For most of us though the mortgage top up is the way to go. To find out more about how you can get a mortgage top up and whether it would suit you read on.
- Should I Get A Mortgage Top Up? – Mortgage top up Ireland 2023
- 3 Top Up Tips – Mortgage top up Ireland 2023
- In a Nut Shell – Mortgage top up Ireland 2023
- What Happens Next – Mortgage top up Ireland 2023
Should I Get A Mortgage Top Up? – Mortgage top up Pro’s & Con’s Ireland 2023
Before we go any further the first question you need to ask is
Should I Borrow More At All?
Even though the current historically low mortgage rates mean you may be able to borrow more than you have today and still pay less in monthly repayments, it doesn’t mean you should.
If you can wait and save up instead, you could simply switch your current mortgage loan to the new lower rates reducing your mortgage repayments and giving you the option to reduce the term of your mortgage.
If that’s not an option for you, read on.
Why Are You Borrowing More?
Remember by topping up your mortgage you are securing the loan against your home and probably borrowing across a long period which means making higher interest payments overall.
So if you are thinking of borrowing more with a mortgage top up, long term investments for the future like home improvements, make more financial sense.
If you are borrowing to fund current spending or consolidating short term debts tread carefully. Interest payments really mount up over longer periods, so debt consolidation might seem smart, but you could end up paying more longer term.
Use our mortgage top up calculator to see what your new monthly repayment will be if you top up your mortgage. Select new mortgage and if your repayments on the topped up amount are still less than you are paying today then you at least have some good options to work with.
3 Top Up Tips – Mortgage Top Up Ireland 2023
There are 3 things you need to consider when you are getting a top up mortgage.
- Principal – the total amount you need to borrow
- Purpose – what is the top up part of the loan going to be spent on
- Process – how do you maximise your approval odds
These 3 p’s are your passport to releasing the maximum amount of cash from your home with a top up mortgage.
1) Mortgage Top Up Tips – Principle
The principle is the total amount you need to borrow.
Principle = outstanding mortgage + top up mortgage amount
In most cases under Central Bank limits the principle can not be bigger than 20% of the value of your home or 3.5 times your annual gross salary.
2) Mortgage Top Up Tips – Purpose
Different lenders have very different policies about what the mortgage top up part of your principle can be used for.
That’s why you should use a mortgage broker to match you with the right lender. Some lenders only allow mortgage top ups for home improvement, whilst others pretty much allow anything depending on the size of the top up you are looking for.
Assuming you engage a broker that works with all the lenders on the market here’s how the options break down by top up mortgage amount.
- Top Up Mortgage Below €20,000, includes all types of discretionary spend such as holidays, weddings, cars with no receipts required.
- Top Up Mortgage €20,000 – €70,000 , things are still pretty flexible. Includes debt consolidation, gifting to children, education, medical expenses. The only real change is you will need to produce the receipts/quotes.
- Top Up Mortgage €70,000 up, at this point it’s home improvement only. All lenders offer home improvement top ups, but only some will let you lend up to 80% of the future rather than current value of your home.
Note from €70,000 up it’s likely you are conducting major structural works so you will need quotes in advance and planning permission.
3) Mortgage Top Up Tips – Process
The top up mortgage process works in pretty much the same way as any other mortgage.
- Get a mortgage broker. They can help you navigate the process and match you with the right lender.
- Get mortgage ready. As part of the application process the lenders will also run the rule over your ability to repay the loan. The 6 months before the application is critical as lenders will look at your bank statements in this period to assess your ability to repay the loan as part of the application.
- Get a solicitor and valuer. Again a good broker can help you with this and some lenders will cover the costs.
- Get your mortgage protection increased. If your increasing your mortgage you will need to increase your protection, this should be less than €5 more per month and you might even save by switching provider.
Once you receive your loan offer and meet any remaining conditions you will be able to drawdown the top up amount into your bank account and get spending.
In a Nutshell – Mortgage top up Ireland 2023
Mortgage top ups are on the rise with historically low rates giving the option for some of releasing cash now without having to increase their repayments.
That said, you should think about if you really need to borrow and why before you take the plunge.
For example for those looking to get their kids on the housing ladder or improve their home, a mortgage top up can make a lot of sense.
Due to the wide range of lender policies though you should arrange your top up through a broker who has access to all the lenders in the market.
What’s next – Mortgage top up Ireland 2023
Make sure all your documentation lines up and if needed clean house on your finances for the 6 months before you apply.
You should then engage with a broker who can guide you to the best lender and help take the pain out of the paperwork. You can check out moneysherpa’s own in house broker teams the mortgage sherpas here.
We have loads more on help to buy grants, the best rates and mortgage provider reviews here.
If you want to have a chat and talk it through you can click for a mortgage check up with one of our sherpas here.
You can get more detail on the documents required for a mortgage and mortgage top ups from the CCPC .