Remortgaging – When Your House Value Has Increased
If you remortgage and your house value has increased, you could be eligible for cheaper mortgage deals.
Alternatively, you could remortgage to release equity from your home and use this money for home improvements, paying off debts, or paying for a wedding or holiday.
What happens when your home’s worth more and you remortgage?
A remortgage is simply taking out a new mortgage to pay off your existing mortgage.
Your house might go up in value for several reasons:
- House prices in your area have increased
- The economy means UK house prices have increased
- You’ve made improvements to your home
If your house has increased in value since you took out your mortgage, or remortgaged, you may be able to:
- Find a cheaper mortgage rate
- Remortgage for more money than you did previously
How does your house value affect your remortgage?
When you take out a mortgage, your loan-to-value (LTV) ratio is the proportion of the property’s value you are borrowing as a mortgage.
For example, if you buy a £200,000 property with a £10,000 (5%) deposit and £190,000 mortgage, your LTV will be 95%.
The lower your LTV the better. This is because mortgage lenders offer their cheapest mortgages to borrowers with a low LTV.
Each mortgage product comes with a ‘maximum LTV’ which sets out the mortgage loan-to-value requirements. This figure is normally between 60% and 95%.
In the above example, if the value of your home rose to £250,000 and you wanted to remortgage for £190,000, your LTV would be 76%. This would be you’d be eligible for better mortgage deals than when your LTV was 95%. Alternatively, you could remortgage for more than £190,000 and take the extra money as cash.
Should I get my property valued before remortgaging?
It can be a good idea to get your property valued before you remortgage. Knowing how much your home is worth will mean you can calculate your LTV which will give you an idea of which mortgage product might be most suited to you.
When you apply for a mortgage (or remortgage), the lender will value your property to check your mortgage is under the maximum LTV for that particular mortgage deal.
Will my mortgage go down when I remortgage?
Whether your mortgage payments will go down when you remortgage depends on the mortgage deal you are offered.
Mortgage lenders offer their best interest rates to borrowers with lower LTVs. So if the increase in the value of your home means you now have a lower LTV, you may be offered a better deal than previously.
However, interest rates have risen recently. This means that mortgages are more expensive than before.
Can you remortgage and take out equity?
There are many reasons to remortgage.
If you have sufficient equity in your home, you may be able to remortgage. Borrowing more and taking the extra money as cash.
For example, if your home was worth £250,000 and your existing mortgage £190,000, you might remortgage for £200,000. This would mean an LTV of 80%. £190,000 of the new mortgage would pay off your existing mortgage and you’d get £10,000 in cash.
But if your goal is to be mortgage-free, the best thing to do when remortgaging is to keep the mortgage amount the same as before (or lower if you have cash savings you can add to it). The increase in value will mean you own a bigger share of your home.
If you’re over 55 you can use a different type of mortgage called ‘equity release’ to access some of the money tied up in your home. Instead of monthly repayments, the money is paid back when you die or go into long-term care.
For all remortgage options it’s always advisable to speak to an experienced mortgage adviser who can help you with a mortgage quote based on your personal circumstances.
How long does it take to remortgage and release equity?
It can take approximately six weeks to remortgage your home, but it depends what you’re doing. If you remortgage to a new lender, they will need to carry out an affordability assessment and credit checks on you, and value your home.
If you remortgage with the same lender it is known as a “product transfer” which can be quicker.
Our recommended mortgage brokers can find you the right remortgage deal and advise on timeframes.
To get an idea of your mortgage options and what mortgage is right for you speak to a mortgage adviser. Our preferred mortgage adviser offers a free mortgage in principle that you can get instantly online.
Please always remember when remortgagingthat your home may be repossessed if you do not keep up repayments on your mortgage.
Last Updated: November 1st, 2024
