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Remortgaging When House Value Has Increased

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23rd Nov 2023 (Last updated on 30th Nov 2023) 7 minute read

A lot of homeowners choose to remortgage their homes when the house value has increased. This is because you can receive lower interest rates and better deals. However, it’s important to research whether this is the best decision.

Each scenario is different and can be affected by various factors such as the complexity of your case and the housing market.

In this guide, we’ve gathered everything you need to know about remortgaging when a property’s value increases. This includes remortgaging with the assistance of a conveyancing solicitor.

  1. What Happens If Your House Goes Up In Value Since Taking Out Mortgage?
  2. Should I Remortgage My House If The Value Has Increased?
  3. Disadvantages of Remortgaging When House Value Has Increased
  4. Should I Remortgage Now With Rising Interest Rates?
  5. How to Remortgage?
  6. Find a Remortgage Solicitor

What Happens If Your House Goes Up In Value Since Taking Out Mortgage?

A value increase is great news, especially if you are due to remortgage your property. It is highly advised that you seek expertise from a mortgage broker or adviser who is regulated by the Financial Conduct Authority (FCA).

If you are switching providers, you should then instruct a conveyancing solicitor when you are ready to go ahead with your remortgage. They can talk you through the legal jargon and liaise with your current mortgage provider and your new mortgage lender.

Cheaper Mortgage Rates

You may qualify for cheaper mortgage rates if the loan-to-value (LTV) has decreased. A low LTV ratio means that your mortgage provider deems you as low-risk. Various factors can impact this including your outstanding mortgage balance. You can consult a mortgage adviser if you are unsure of the best deal for you.

Larger Mortgage

Some people take out a larger mortgage as part of an Equity Release Plan. This means you can borrow more money, pay off the remaining balance on your current mortgage and keep the rest of the money.

Read more on Do I Need a Solicitor for a Remortgage?

Should I Remortgage My House If The Value Has Increased?

Remortgaging when your property value has increased can be hugely beneficial for several reasons. You could be in a stronger position to negotiate a better mortgage deal. This may help you to cut down on your monthly mortgage repayments. You can also complete home improvements such as loft conversions or adding an extra bedroom. This can add to your total value.

Here are some advantages to keep in mind:

Take Out Equity

You can remortgage to release equity. This means that your remortgage covers the remaining balance on your old mortgage. You can then withdraw the leftover money as cash. Bear in mind that if you opt for a larger mortgage, you’ll be subject to high interest rates. This extra money can contribute towards a refurbishment or extension on your property. In turn, this can potentially increase its value further.

Access to Wider Market

You may find a better deal remortgaging with another mortgage lender. Mortgage brokers can offer access to a wider market beyond your current provider.

Lower LTV Ratio

If the value of your property has increased, it can put you in a stronger position to negotiate a better deal thanks to the lower LTV ratio. You may be eligible for lower mortgage rates. While this is not guaranteed and is dependent on your mortgage broker, you may be able to negotiate lower monthly repayments. This can provide a huge relief for homeowners.

Cost Efficient

Hiring a conveyancing solicitor and mortgage broker will incur additional costs. However, this can be outweighed by the savings you will make if you secure a better deal. Keep in mind that this may not always be the case.

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Disadvantages of Remortgaging When House Value Has Increased

Remortgaging is not always the best choice, even if your property value has increased. Factors including the housing market can impact whether you should remortgage your property. Therefore, seeking professional advice from a mortgage adviser will give you a clear idea of your case.

Here are some disadvantages to keep in mind:

Early Repayment Charge (ERC)

An Early Repayment Charge may be applied if you choose to terminate your current mortgage before it is due to end. The total ERC cost is dependent on various factors including your mortgage lender and how long is left on your current contract. A general rule of thumb is that the ERC will be higher the further away from your contract’s end.

Monthly Payment Increase

If you decide to take out a larger mortgage, you may have to pay back higher monthly payments. Your mortgage adviser can provide advice on these matters. You should weigh up the monthly cost with your current income and outgoings to calculate whether you can afford to make these payments.

Paying More Interest

Those using their remortgage to pay off any existing debts may find that they might end up paying a higher amount of interest on their loan. If you have a poor credit history or your credit score is low, you may be subject to higher interest rates.

Should I Remortgage Now With Rising Interest Rates?

Rising interest rates can affect whether remortgaging is the right step for you in the current market. It also depends on what kind of deal you currently have and what you plan on taking out.

Fixed-rate deals mean that you will pay a flat rate for the duration of the remortgage contract. However, a Standard Variable Rate (STV) means that your interest will fluctuate according to the rates set by the Bank of England.

The current Bank of England interest rate is 5.25% as of November 2023 and has remained at this percentage for 15 consecutive reviews. It is predicted that the base interest rate has peaked and will begin to fall slowly, according to The Times. You can choose to wait and see if rates fall further, although this is not guaranteed. However, some mortgage lenders may allow you to lock in a new deal if you have less than 6 months left on your current fixed term without committing.

You should always consult a mortgage adviser who can determine what the best course of action is for you. Your conveyancing solicitor can also explain your case in layman’s terms and offer expert advice.

Read more on When Should You Remortgage?

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How to Remortgage?

Conducting research and seeking professional advice is highly recommended when remortgaging. This will ensure that you make the best decision. It’s important to note that each case is different and more complex scenarios such as buy-to-let properties may take time to complete.

Here are your main options:

Use the Same Lender

If you are staying with your current lender, you do not need to hire a remortgage solicitor as this is known as a Product Transfer. These require less paperwork as your provider will have all your details.

Hire a Remortgage Conveyancing Solicitor

If you are swapping providers, you should instruct a remortgage conveyancing solicitor. They will act on your behalf by liaising with relevant parties. This includes your mortgage lender. They can provide expert advice and guide you through the remortgaging process. This can reduce stress during the remortgage as they will take care of the legal side, so you can remortgage with confidence.

The average solicitor fee for remortgaging is £3,553. This cost includes the conveyancing fees, leaving your current deal, and the new deal cost.

If you are staying with your current lender, you do not need to hire a remortgage solicitor as this is known as a Product Transfer.

Contact a Mortgage Broker

A mortgage broker can research other providers on your behalf. They may conduct a valuation survey. The more recent the data is, the more accurate the survey will be.

Read more on How to Remortgage

Find a Remortgage Solicitor

Compare My Move can connect you with up to 6 conveyancers in your area who can assist with your remortgage. Simply fill in our conveyancing comparison form to compare quotes and save up to 70% on your remortgage costs.

All our conveyancing partners are regulated to ensure that you receive the best service. You can also be assured that your conveyancer or conveyancing solicitor will carry out all cases to the highest standard. They are regulated by one of the following:

  • Solicitors Regulation Authority (SRA)
  • Council for Licensed Conveyancers (CLC)
  • The Law Society of Scotland (LSS)
  • The Law Society of Northern (LSNI)
  • Chartered Institute for Legal Executives (CILEX)

You can also ask friends and family for recommendations if they have recently remortgaged their property. Always research the firm thoroughly and read online reviews beforehand. This will ensure they can assist with your case.

Disclaimer

All data, research, facts, and figures have been taken from reputable sources and government data that was accurate at the time of writing. Any information featured in this guide should not be relied on or regarded as an authoritative statement of law. While we aim to ensure that all information is accurate, we make no representations about the suitability or reliability with respect to the website as well as any products, information, or services that are featured on the website. Mortgage criteria, policies, and interest rates change regularly and vary depending on the lender and type of mortgage you have. You should speak directly to your mortgage lender for clarification. It should be noted that your home may be repossessed if you cannot keep up with your mortgage payments.
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