There is, however, another form of property loan that might prove attractive in some cases. This is a mortgage top-up loan. If you have taken out a mortgage and already repaid a significant portion of the principal, then providing your bank agrees to the new loan, the top-up arrangement allows you to borrow back some or all of the principal repaid. You are, in a way, recycling your mortgage.
Let’s look at an example. Ten years ago, you took out a fixed rate, 20-year loan to buy a house for €500,000. The total principal repaid currently stands at €250,000 (you have €250,000 left to pay, not including interest). The top-up mortgage mechanism means that in theory, you can borrow up to €250,000.
Only “in theory” because not all banks will agree to such a request, and they are under no obligation to agree. However, to retain your custom, and provided the terms and conditions so allow, the lender might agree under certain conditions. Your income level must allow you to cover the new repayments; you must have repaid a certain portion of the principal before you can borrow it again; the new loan must be for property, either for renovation work or a new purchase; the mortgage, being valid for 30 years, must cover the duration of the new loan; and a minimum loan is generally required. Top-up loans are therefore not suitable for minor building work.