You may be looking to remortgage for a variety of reasons from looking to pull money out of your property in the form of an equity release to just coming to the end of your fixed-rate period.
Knowing the value of your house is a key number to understand how much equity you currently have in your property and what loan to value bracket you’re likely going to fall into. However, who values your house when you remortgage?
When you remortgage the lending company will value your house. They will instruct an independent local property expert to come to your property and provide a value based on a number of factors including comparable sales in the area.
What Happens if Your Property Value Has Reduced When Remortgaging?
If the mortgage lender values the house lower than you’re expecting, often referred to as a down valuation, it’s not a major issue unless it affects your eligibility to secure the mortgage or will increase your mortgage payments.
- Restricts your eligibility for a mortgage. This one is very serious as effectively means the mortgage lender will not give you the mortgage as you don’t meet the minimum requirements. This can be due to not having enough equity in the property for example if the mortgage lender required at least a 90% loan-to-value ratio, which is a 10% deposit.
- Increases your monthly mortgage payments. When the property is valued at lower than expected, if this means you drop into a lower loan-to-value ratio bracket, it can mean you end up paying higher mortgage payments. You usually get a better mortgage interest rate every 5% reduction in your loan-to-value ratio, until it starts to plateau at around 50%. This means if you move from an 80% loan-to-value ratio bracket into an 85% loan-to-value ratio bracket.
- No impact. If your mortgage lender will still give you the mortgage and it doesn’t cause you to drop into a higher loan-to-value bracket, it doesn’t make any difference that your property has been down valued. Other than of course the frustration that you were hoping that your property was worth more.
How Do You Avoid Down Valuation When Remortgaging?
To help avoid a down valuation when you are remortgaging your property, you need to position your property as if you’re trying to sell it. This means making sure the property is well maintained, clean and tidy for when the property expert comes around.
Simple things such as mowing the lawn if you have a garden and cleaning up inside so the rooms look more spacious can help contribute to a better valuation.
As a trained professional they will most likely be able to see through a lot of these minor improvements and changes. However, if it’s clean and tidy it can help show the property at its best as well as help get more natural light into the property which can really help the perceived value.
If your property is given a lower value than expected, there are a variety of options you have available.
- Appeal against the valuation. If you don’t agree with the mortgage valuation you can appeal and provide clear evidence of why you believe it should be higher. This will usually be by showing clear evidence of comparable sales in the local area within the last 6 months that are higher than your valuation. Appeals are rarely successful, however, if it will help you get a cheaper mortgage by moving up a loan-to-value bracket it might be worth a try.
- Use a different lender to remortgage. You can change mortgage lenders to see if their appointed surveyors will view the property in a different light. A new lender might use a different surveyor that’s got better local knowledge, however there’s also a risk that they value the property lower than the original valuation.
- Accept the lower valuation. If the valuation doesn’t cause you any negative effects, such as higher mortgage payments or your mortgage company flagging concerns about eligibility then it might be worth just accepting it.
How Long Does It Take To Get A Mortgage Offer After A Valuation?
After you’ve had your property valued by the independent property advisor you should expect a mortgage offer from your lender within a week. This can happen quicker, however, will depend on the backlog of work and whether the valuation is in line with expectations.
Can A Mortgage Be Declined After Valuation?
Yes, a mortgage can be declined after your property has had a valuation. However, in order to be declined, the valuation usually has to be quite materially different than the original estimate as well as cause issues with your affordability.
For example, if the property price comes back and it’s 10% lower than expected, if you only had a 5% deposit originally, you could be in negative equity. If this happens in order to remortgage the property, you’ll most likely have to increase your original deposit to get you back in line with the lender’s mortgage requirements which will be at least a 5% deposit.
However, with a remortgage, you’ll likely have already been paying your mortgage for at least two years from when you got your mortgage originally. Over this time period, you’ve been paying off the principle and increasing your equity, so unless your property value has fallen significantly since your original mortgage, hopefully, this won’t be an issue.
Do You Need A Valuation For A Remortgage?
Yes, you need a valuation for a remortgage as the lender will want to verify the property is worth the money they’re letting you borrow. When remortgaging a lot of mortgage lenders will offer their valuation for free as an incentive to encourage you to remortgage with them.
Some lenders will charge you a fee for a valuation which can be based on the value of the property. This means they can range from £150 to upwards of £1,500. When looking for a mortgage lender to remortgage make sure to check their valuation fees so you don’t have an unexpected surprise.
It might also mean they aren’t as competitive when compared to other lenders with slightly higher interest rates once you factor in their high fees.
Overall, as you can see, the mortgage lender values your property by sending out a local expert. This is often done by the mortgage lender for free as an incentive to choose them to secure your mortgage.
If you have any questions about the remortgage process or need any help finding the best deal, make sure to speak to a mortgage advisor. They can give you advice specific to your circumstances as well
If speaking to a mortgage advisor is something you’re considering, I’ve written a post about what questions to ask a mortgage advisor that may be useful to make sure you’re getting value out of your conversations.
Hope all goes well with the remortgage and make sure to push for the best mortgage interest rates you can get!
Hi, I’m John. I’ve always had a keen interest in Finance, so much so that I’ve made a career out of it! This site is a place where I can share everything I’ve learned as well as give me the excuse to research certain topics.
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