Legal Definitions - further advance

A further advance refers to an additional amount of money loaned by a lender to a borrower, typically secured by the same property that secures an existing loan. It can also describe a specific arrangement where unpaid interest on a loan is added to the original principal amount, effectively increasing the total debt.

• Scenario 1: Home Renovation Loan

  Imagine a homeowner, Sarah, who has a mortgage on her house. A few years later, she decides to build an extension and needs additional funds. Instead of taking out a separate personal loan, her existing mortgage lender agrees to provide her with an extra sum of money, increasing her total mortgage debt. This new amount is secured by the same house.

  This illustrates a further advance because the lender has provided an additional loan to Sarah, using her existing property as security, thereby increasing the overall amount owed on her original mortgage.

• Scenario 2: Business Expansion Capital

  Consider a small business owner, David, who has a commercial property mortgaged to a bank. His business is thriving, and he wants to purchase new equipment to expand operations. The bank, seeing his good payment history, agrees to lend him more money, adding it to his existing commercial mortgage. The new loan is also secured by the same commercial property.

  This is a further advance because the bank has provided additional capital to David, secured by the same commercial property that already served as collateral for his initial loan, allowing him to expand his business without needing a completely new security arrangement.

• Scenario 3: Capitalization of Arrears

  Suppose a property developer, Maria, has a development loan with a bank. Due to unexpected delays, she falls behind on some interest payments. To help her manage, the bank and Maria agree to add the overdue interest amounts directly to the outstanding principal balance of her loan. This means she no longer has to pay those specific interest arrears immediately, but her total principal debt increases, and she will pay interest on this new, higher principal amount going forward.

  This demonstrates a further advance in an equity context because the unpaid interest, which was previously a separate debt, has been converted into and added to the principal amount of the original loan, effectively increasing the core debt secured by the property.