When it comes to managing your finances as a homeowner, remortgaging is a term you’ve likely come across. It’s a common financial move that can help you save money, access equity, or secure better mortgage terms. But one question often arises during this process: When you remortgage, is your house revalued?
What Does Remortgaging Mean?
Understanding the Basics of Remortgaging
Remortgaging simply means switching your current mortgage to a new deal, either with your existing lender or a new one. Unlike buying a new home, remortgaging doesn’t involve moving house. Instead, it’s a financial decision aimed at improving your mortgage terms or accessing the equity tied up in your property.
Why Do Homeowners Remortgage?
There are several reasons why homeowners choose to remortgage:
- Securing Better Interest Rates: If your current mortgage deal is about to end, remortgage can help you avoid being moved to your lender’s standard variable rate (SVR), which is often higher.
- Releasing Equity: If your property has increased in value, you can remortgage to borrow more money against your home.
- Changing Mortgage Terms: Some homeowners remortgage to switch from a variable rate to a fixed rate or to adjust the length of their mortgage term.
How Is It Different from Buying a New Home?
When you buy a new home, you’re taking out a mortgage to purchase a property. Remortgaging, on the other hand, is about replacing your existing mortgage with a new one. It’s a financial strategy rather than a property transaction.
Why Is House Valuation Important When You Remortgage?
The Role of Valuation in Remortgaging
When you remortgage, your lender needs to know the current value of your property. This valuation is crucial because it determines your loan-to-value (LTV) ratio, which is the percentage of your property’s value that you’re borrowing. For example, if your home is worth £300,000 and you’re borrowing £150,000, your LTV is 50%.
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How Valuation Impacts Mortgage Offers
The valuation directly affects the mortgage deals available to you. A lower LTV ratio often means access to better interest rates, as lenders see you as a lower-risk borrower. Conversely, if your property’s value has decreased, your LTV ratio will increase, potentially limiting your options.
Borrowing Capacity and Equity Extraction
If your property has increased in value since you took out your original mortgage, you may be able to borrow more money. This is known as equity extraction. However, an accurate valuation is essential to ensure you’re not borrowing more than your property is worth.
When You Remortgage, Is Your House Revalued?
Do Lenders Revalue Your House?
In most cases, yes, your house is revalued when you remortgage. Lenders need to assess the current market value of your property to determine your LTV ratio and offer appropriate mortgage terms. However, the type of valuation conducted can vary depending on the lender and your circumstances.
Types of Valuations Used by Lenders
- Desktop Valuation: This is an automated process in which the lender uses data from recent property sales and market trends to estimate the value of your home. It’s quick and cost-effective but may not account for unique property features.
- Drive-by Valuation: In this method, a surveyor conducts an external inspection of your property. While it’s more accurate than a desktop valuation, it doesn’t involve entering your home.
- Full Physical Survey: This is the most detailed type of valuation, involving a thorough inspection of your property’s interior and exterior. It’s typically used for high-value properties or when there are concerns about the property’s condition.
Is Revaluation Always Necessary?
Revaluation is usually required when switching to a new lender. However, if you’re staying with your current lender and your financial situation hasn’t changed significantly, they may rely on their existing valuation records or use an indexed valuation (adjusting the previous valuation based on market trends).
Types of House Valuations Used in Remortgaging
Valuation TypeDescriptionProsConsCost
Desktop Valuation Automated, based on market data and recent sales Quick and inexpensive May not account for unique property features Often free.
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Drive-by Valuation External inspection by a surveyor More accurate than desktop valuations Doesn’t assess interior condition Low to moderate.
Full Physical Survey Detailed inspection of the property’s interior and exterior Most accurate Time-consuming and costly £150–£1,500+
How Does the Valuation Affect Your Remortgage Deal?
Loan-to-Value Ratio and Mortgage Pricing
Your LTV ratio is a key factor in determining your mortgage terms. A lower LTV ratio can unlock better interest rates, while a higher LTV ratio may result in higher rates or fewer options.
Impact of Valuation on Borrowing Power
If your property is valued higher than expected, you may be able to borrow more money or secure a lower interest rate. On the other hand, a lower valuation could limit your borrowing capacity and increase your monthly payments.
Preparing Your Home for Valuation
To achieve the best possible valuation, consider these tips:
- Declutter and Clean: A tidy home creates a positive impression.
- Address Repairs: Fix any visible issues, such as peeling paint or broken fixtures.
- Enhance Curb Appeal: Ensure your property looks well-maintained from the outside.
Can You Get Your House Independently Valued Before Remortgaging?
Benefits of Independent Valuation
An independent valuation can give you a clear idea of your property’s worth before approaching lenders. This can help you set realistic expectations and negotiate better terms.
When to Consider Independent Valuation
If you believe your property is undervalued or if you’ve made significant improvements, an independent valuation can provide a more accurate assessment.
Common Questions About House Revaluation When Remortgaging
Is a Revaluation Always Necessary?
Not always. If you’re staying with your current lender, they may not require a new valuation.
What Happens if the Valuation Is Disputed?
If you disagree with the lender’s valuation, you can challenge it by providing evidence, such as recent sales data or an independent valuation.
Practical Tips for Homeowners Considering Remortgage
- Research Market Trends: Understand how property values are changing in your area.
- Maintain Your Property: A well-maintained home is more likely to receive a favorable valuation.
- Understand Lender Policies: Ask about the type of valuation they’ll conduct and any associated fees.
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