Remortgaging may seem costly and a bit inconvenient to arrange. Yet, it can be a strategic move that’ll save you thousands of pounds by reducing your monthly payments and releasing equity tied to your home.
Now, you may be wondering, should you get your house revalued before remortgaging? The short answer is yes, but only if it puts you in a stronger financial situation.
In this article, we explain how property revaluations can benefit you in the remortgaging process. Learn why revaluation may be disadvantageous, and discover other options you can try when remortgaging.
What Is Property Revaluation?
Property revaluation is an assessment of your home’s current market value. It helps determine the actual cost of your property today.
The cost of your home has likely changed compared to when you first took out the mortgage. Property values can rise because of market trends, home renovations, and neighbourhood development.
Property revaluation allows lenders to revisit your mortgage rates and give you better rates based on your home’s new value.
However, property revaluation can also be disadvantageous if your property’s value decreases. This can happen if your home has structural issues and outdated interiors, or if there is a decline in the local area.
How Does Revaluation Work?
Property revaluation is carried out by a professional surveyor or mortgage lender. They’ll visit your home, assess the structure, and note any new upgrades. They may also check the current market trends and the location’s desirability.
After this, the surveyor writes a report with an estimate of the new market value. They will indicate potential risks that could affect the remortgage.
Your lender will use this report to calculate your loan-to-value (LTV) ratio. The LTV affects your new mortgage rates and determines how much you can borrow.
Why Should You Get Your Home Revalued Before Remortgaging?
Getting your home revalued can be a smart financial move that can help you secure better mortgage deals. Below are some of the benefits of revaluations for remortgages.
1. Better Loan-to-Value Ratio
One of the biggest advantages of revaluation is the potential to improve your loan-to-value ratio. In simpler terms, LTV is the remaining balance of your mortgage divided by the current value of the home.
The higher your property’s value, the lower your LTV is.
Most lenders offer better rates to those with low LTVs. This gives you more choices when finding a lender for a remortgage.
2. Lower Interest Rates
Many mortgage deals are tiered based on the LTV. For instance, your tier could be at 90%, 85%, 80%, and so on.
The lower your LTV tier is, the less risk you have for lenders. Therefore, if you move to a lower tier, they may cut your interest rate upon a remortgage.
Revaluation can potentially lower costs, even with other fees associated with a remortgage.
3. Increased Equity
In addition to the LTV ratio, getting a higher property valuation increases your equity.
Home equity is the portion of your property that you own outright. The higher your equity, the less risk you pose to lenders.
Because of this, a higher equity gives you more lending power. This can get you more cash from the lender, which you may use for home improvements or even new businesses.
Of course, note that releasing equity also increases your balance, leading to bigger monthly payments.
4. Updated Market Value
One of the reasons why you should get your house revalued is to update your property’s worth. Over time, the value of a property can rise due to demand and new developments in the area.
This matters because some lenders only offer their most competitive deals to people with higher-value homes. In short, a revaluation can maximise your financial position.
When Is Revaluation Worthwhile?
The value of your property can either increase or decrease depending on your circumstances. Revaluation can be beneficial if you suspect your property’s value has increased.
Below are some factors that can raise your property’s value.
1. Recent Home Improvements
You recently made improvements to your home, such as interior renovations or house extensions. Moreover, garden landscaping, kitchen remodelling, or solar panel installations are all improvements that can raise a property’s value.
2. Area Development
Did you mortgage your home back when there were no other structures in the area? Now that new establishments are nearby, your property’s value has likely risen.
Your neighbourhood’s appeal will increase with the opening of new cafes and entertainment hubs. Nearby schools, transportation links, shopping centres, and parks will add value to the property.
What’s more, improvements to public safety, such as cameras and better street lighting, can also help.
3. Time
If it’s been several years since your last valuation, it may be a good idea to have your home revalued before remortgaging.
Property values rarely stay the same. Over time, prices tend to rise, especially with urbanisation, inflation, and construction costs.
So, your property’s value may have increased even without major renovations.
Risks to Consider Before Revaluation
Of course, having your home revalued can also come with risks. It can raise your loan-to-value ratio, making it harder to find lenders.
Here are some reasons why it may be disadvantageous to revalue your home before a remortgage.
1. Lower Valuation
Your property’s value can decrease in certain cases. For example, if the house is in poor condition or if you made non-compliant alterations, these can have negative effects.
Additionally, new roads with high noise levels or proximity to industrial facilities can lower your property’s value.
Unfortunately, a lower valuation can derail your remortgage and increase your mortgage rates.
2. No Impact on Remortgage
Even if your property’s value increases, it doesn’t mean you’ll automatically benefit. If you’re sticking with your current lender, they may be unwilling to give you new rates.
In this case, consider switching to a lender with better products.
3. Remortgage Delays
The whole process of revaluation may take a while to finish, causing delays to the remortgage. This can be disadvantageous if the lender is offering a low interest rate for a limited time only.
4. Added Costs
Revaluation can have potential expenses, like valuation fees from third-party surveyors. The cost of the revaluation depends on the property’s value.
Tips for Revaluing Your Home Before Remortgaging
Revaluation can help you get better mortgage deals, but preparation is necessary to ensure the results are in your favour. Here are some tips that can help you get better evaluation results.
- Do Market Research: Check the recent property sales in your area. Look at the current prices of similar properties on the same street.
- Prepare Your Home: Repair any damage to your home and update your interiors. Surveyors will assess structural issues, energy efficiency, and space layout.
- Gather Documents: Make sure you have all the documents a surveyor may need. These include title deeds or building permits.
- Use Online Valuation Tools: Some websites, such as Zoopla, can help you estimate the cost of your property.
- Get a Second Opinion: If you think your lender made a poor valuation, you can ask for a second opinion. You can go to an independent surveyor for an unbiased review.
FAQs
Will a Revaluation Increase Taxes?
No. Having your home revalued doesn’t directly affect how much tax you have to pay. Revaluation is done by lenders or surveyors who aren’t associated with the local council.
What Happens if the Property Value Is Less than Expected?
If the property value is less than expected, a lender may reduce the amount they’ll give you. You may need to pay higher rates or look for a new lender.
Because of this, prior research is vital so that you’re sure the revaluation works in your favour.
Is Revaluation a Requirement Before Remortgaging?
Yes. Most lenders will revalue your home before agreeing to a remortgage. It’s up to you whether you want to hire a third-party surveyor to assess your home beforehand.
Having your home revalued can help you determine whether remortgaging is a good idea.
Conclusion: Should You Get Your House Revalued Before Remortgaging?
Getting your house revalued before remortgaging has many benefits. It can give you a better loan-to-value ratio, lower interest rates, and increase equity. That said, it can also have downsides when the property’s value is less than expectations.
To get more favourable results, you should improve your home and do market research beforehand. Finally, you can ask experts to help revalue your home before remortgaging.
When the Bank Says No has expert advisers who can help you through the entire revaluation process. Remortgaging your home doesn’t have to be scary. With our help, you can avoid the stress and save thousands of pounds!