My House Has Gone Up In Value: Can I remortgage?
One of the most common reasons homeowners choose to remortgage is because the value of their house has increased.
If you have more equity in your home than when you first took out your mortgage, you can remortgage to get a better deal with lower rates. Or, you may be able to cash in some of the extra value and raise some money for yourself.
Here, we explain how to get an updated value of your house, the benefits of remortgaging when your house value increases, and why you might consider remortgaging with a broker to get the best deal.
In this guide:
How Do I Know if the Value of My House Has Increased?
Before you start looking up remortgage deals, you'll need an accurate idea of your property's current market value.
This will give you an accurate indication of your loan to value (LTV). Getting a property valuation and working out your LTV are the two crucial components of remortgaging when house value has increased.
Get an Accurate Valuation
An estate agent or surveyor who knows the property market well is the best person to ask. The value of your property can be estimated using an online valuation tool, but a professional valuation is more accurate.
As the value of your property rises, you will have more equity to work with when remortgaging. This is because the value of your loan stays the same while your property value gets bigger - so your LTV (loan to value) increases.
You must be realistic with this - you don't want to end up in a situation where a lender disputes the value you've based your calculations on.
Work Out Your Loan to Value
Once you have a clear idea of your property's value following a professional valuation, you can calculate your loan to value (LTV).
Your LTV is what lenders use to evaluate the rates they offer you and how much capital you can release. The lower your LTV ratio, the better the remortgage deal you'll be able to find.
This is because the lower your LTV, the less risky it is for your lender - so they can be more flexible.
Example LTV Calculation
The balance on your current mortgage statement is £300,000
Your house is valued at £450,000
300,000 / 450,000 = 0.66
0.66 x 100 = 66.6%
Is It a Good Idea to Remortgage When Your House Value Has Increased?
If the value of your house has increased, there's a lot of potential that comes with remortgaging.
- You may have moved into a lower LTV band, meaning you can negotiate better rates with lower monthly repayments
- Or, you can capitalise on your increase in equity by taking out a fresh mortgage on the full amount, raising extra money for home improvements or consolidating debt (among other things)
Remortgage to Get Cheaper Rates
The value of your property may have risen considerably since you first bought it, which could be likely if you own a property in a popular area of Central London like Kensington or Notting Hill, for example.
If this is the case, you could be in an excellent position to negotiate cheaper mortgage rates, lowering your monthly repayments. You could either approach your current lender or switch to a new lender who may have a more competitive product.
Remortgage to Raise Capital
With a lower LTV, you can also opt to remortgage to release equity.
- You can take out a new mortgage, cover the balance of your old mortgage, and withdraw the extra as cash for yourself. If you don't borrow more than your previous loan, your repayment rates should stay the same.
- Or you could take out a larger mortgage loan to release even more cash - but you'll probably pay higher interest rates.
A lender will want to know what you intend to do with the money when you remortgage to release equity. Home improvements, buying a second home, school fees, helping a dependent get onto the property ladder, a holiday or a new car are all common uses they will approve.
Things to Consider When Remortgaging Early
There are a few things to keep in mind if you're remortgaging early because your house value has risen.
As well as calculating how much you might save by switching to a new remortgage deal or how much equity you can unlock from your home, check the potential costs of exiting your current mortgage before your term ends (if it hasn't already).
The Cost of Remortgaging Early
- If you stick with your current lender when remortgaging, they may waive any early repayment or exit charges. But you'll likely have to pay this fee if you choose a new lender. You should determine the exact figure and factor it in when making your decision. Do the benefits of remortgaging outweigh the costs?
- When you arrange a new mortgage, you may have to pay fees. Lenders often include these in a package deal, but you might also have to pay an arrangement, valuation, and solicitor fee.
Compare Remortgage Deals
It always pays to do some research when remortgaging. It may seem much easier to stay with your current lender, but they won't tell you about other options available on the market.
You can compare remortgage deals online or, better still, use a mortgage broker to get a realistic view of how much money you could save or how much money you could release through remortgaging.
Independent mortgage brokers can access remortgage deals you won't find on the high street. They are also your best shot if you're self-employed, earning in foreign currency, have complicated income streams, or have a less-than-perfect credit history.
Benefits of Remortgaging with a Broker
Even if your house has increased in value, remortgaging is not always the most straightforward process. Some lenders may reject your application if you do not meet their criteria, or their remortgage products may not suit your financial requirements.
You can benefit from seeking professional advice from a remortgage broker before committing to a new mortgage deal. Using a remortgage broker offers many benefits to a client, including:
- Whole market access
Tied and multi-tied brokers prefer to work with their limited list of contacts and lenders. However, independent brokers can provide complete market access to exclusive remortgage deals that may otherwise be difficult to find.
- Speed and convenience
Remortgage brokers research the mortgage market for cheaper deals on your behalf, saving you a lot of time and energy. They can offer you a shortlist of the best deals available so you can decide which mortgage product to choose.
- Expert guidance and advice
Therefore, a broker can match you with the best plan to meet your remortgaging requirements. There is often a better chance of a lender accepting your remortgage application if you use a professional broker as an intermediary.
Find the Best Remortgage Deal Through Clifton Private Finance
If you're looking to remortgage a residential or buy-to-let property in the UK, our expert mortgage brokers can help you.
Our extensive experience and close relationships with high street and specialist lenders enable us to offer expert advice and secure the best remortgage deal for you.
We work closely with our clients throughout every step of the remortgaging process and are dedicated to finding the best remortgage product on the market to meet your financial needs.
To see what we can do for you, call us at 0203 900 4322 or book a consultation below.