When it comes to remortgaging, one question that many homeowners frequently ask is: “Will my house be revalued?” This is an important consideration since the value of your property can significantly impact your financial options. In this blog post, we will dive deep into the remortgaging process, the reasons your home may be revalued, and what it means for you as a homeowner.
Understanding Remortgaging
Before we explore the valuation aspect, let’s clarify what remortgaging entails. Remortgaging is the process of switching your current mortgage to a new deal, either with your existing lender (commonly referred to as a product transfer) or a different lender. Homeowners typically remortgage to take advantage of better interest rates, access additional capital, change the length of their mortgage term, or even consolidate debts.
It’s essential to note that remortgaging is not simply a paperwork process; it involves a thorough assessment of your current mortgage, your financial circumstances, and importantly—the value of your property.
The Need for Property Valuation
Now, let’s address the question at hand: Does your house get revalued when you remortgage? In most cases, the answer is a resounding yes. Here’s why:
- Lender’s Risk Assessment: Lenders need to assess the current market value of your property to determine the level of risk they are undertaking when providing a new mortgage. A valuation ensures they do not lend more than what the property is worth, especially if the housing market is fluctuating.
- Compliance with Regulations: Regulatory requirements often dictate that lenders must perform due diligence. By valuing your property, they can ensure they comply with financial regulations related to lending practices.
- Establishing Loan-to-Value Ratio (LTV): The LTV ratio is a critical factor lenders consider when evaluating remortgage applications. This ratio is determined by dividing the mortgage amount by the property’s appraised value. For instance, if your property is valued at £200,000 and you wish to remortgage for £160,000, your LTV would be 80%. A lower LTV often translates to better interest rates, so knowing your current home value is essential.
Discover how much equity you need to remortgage.
How Valuations are Conducted
The way your property gets valued can vary depending on the lender and specific circumstances:
- Indexed or Desktop Valuation: In instances where the lender feels comfortable, they may conduct a desktop valuation. This form of valuation relies on public records and online data regarding recent sales in your area. It’s quicker and can be less expensive, providing the lender with a preliminary assessment without a physical inspection.
- Drive-By Valuation: Another option some lenders may consider is a drive-by valuation. In this case, an appraiser assesses the exterior of the property without entering it. This type of valuation is often used for remortgages where the lender may already have sufficient information about the property or when they need a quick assessment. While it offers a less comprehensive view than a full physical inspection, it can help streamline the process when the property’s condition is generally stable.
- Physical Valuation: If there’s uncertainty revolving around your property’s condition, or if significant changes have been made, the lender may opt for a physical valuation. An independent surveyor visits your property to assess its condition, features, and any improvements made since the last valuation.
Factors Influencing Property Value
When a revaluation is conducted, several factors will influence the final value of your home:
- Location: Property values can fluctuate based on local market conditions, neighbourhood desirability, and access to amenities such as schools and transport links.
- Condition and Improvements: Upgrades such as kitchen remodelling, new roofing, or energy-efficient installations can positively impact property value. In contrast, neglect or extensive needed repairs can diminish it.
- Market Trends: The overall health of the housing market plays a significant role. If property prices in your area are rising, your home may have increased in value since your last mortgage deal.
- Economic Conditions: External factors such as interest rates and economic stability can also influence property values. A booming economy often leads to increased property prices, whereas economic downturns can result in depreciation.
Benefits of Revaluation When Remortgaging
Having your home revalued when remortgaging can offer significant benefits, including:
- Better Interest Rates: If your home’s value has increased, you may qualify for lower interest rates, leading to significant savings over the term of your mortgage.
- Access to Additional Funds: Should your property value have risen, it’s possible to remortgage for more than your existing mortgage, allowing you to access additional funds for projects or financial needs.
- Improved Lending Options: A favourable revaluation may open up new lending options that were previously unavailable to you due to a higher LTV ratio.
- Financial Flexibility: With the potential to unlock equity in your home, you gain the financial flexibility to invest in further property improvements, save for future aspirations, or manage existing debts more effectively.
Conclusion
When you remortgage, it’s highly likely that your house will be revalued as part of the process. This step is crucial for lenders to assess risk and for you to make informed decisions about your financial future. If you’re considering remortgaging, consult a mortgage adviser who specialises in remortgages so they can guide you through the specifics of your situation and ensure you benefit from the best possible terms.
