How Rising Property Value Can Change Your Remortgage Options: A higher property value may reduce your loan-to-value ratio when your mortgage balance has stayed the same or fallen.
A lower LTV could provide access to a wider range of remortgage products. However, a higher valuation does not guarantee a lower rate or additional borrowing.
Lenders will still review affordability, income, expenditure, credit history, property type and the purpose of any extra borrowing.
What happens when your property value increases?
Property equity is the difference between your home’s current value and the amount secured against it.
For example:
- Estimated property value: £350,000
- Current mortgage balance: £210,000
- Estimated equity: £140,000
- Current loan-to-value: 60%
Loan-to-value, known as LTV, compares the mortgage balance with the property’s value.
The calculation is:
Mortgage balance ÷ property value × 100 = LTV
A property value increase can reduce your LTV without changing the mortgage balance. This may move your application into another lender pricing band.
However, your home’s estimated selling price is not automatically the value a lender will accept.
Why does a lower LTV matter when remortgaging?
Lenders use LTV as one measure of lending risk.
A lower percentage means the mortgage represents a smaller part of the property’s value. Some lenders offer different products at thresholds such as 90%, 85%, 80%, 75% or 60% LTV.
Crossing one of these thresholds may provide:
- Access to more mortgage products
- Different interest-rate options
- Lower product fees in some cases
- Greater choice of fixed or variable terms
- More flexibility when reviewing the mortgage term
A lower LTV does not guarantee a better overall deal. Product fees, legal costs and early repayment charges can outweigh a lower headline rate.
Read more about how loan-to-value affects a mortgage.
Can you release the increase in value?
You may be able to borrow more when remortgaging, but you cannot normally withdraw every pound of equity.
Suppose the property is worth £350,000 and the current mortgage balance is £210,000.
A new mortgage of £245,000 would produce:
- New mortgage: £245,000
- New LTV: 70%
- Potential additional borrowing: £35,000 before costs
The lender would still assess whether the new £245,000 mortgage is affordable.
Equity describes value held in the property. Affordability determines whether part of that value can be borrowed responsibly.
Our guide to remortgaging to release equity explains the wider process.
How will the lender value your home?
A remortgage lender may use:
- An automated valuation model
- A desktop valuation
- A drive-by valuation
- A physical property inspection
The method can depend on the property, requested LTV, borrowing amount and lender policy.
The lender’s valuation may be lower than an estate agent’s estimate. It reflects the property as mortgage security rather than a guaranteed selling price.
Recent comparable sales, condition, construction and local demand may influence the result.
Learn how mortgage valuations for remortgaging can affect your available products.
What can additional borrowing be used for?
Subject to lender criteria, homeowners may borrow more for purposes including:
- Essential repairs or home improvements
- Buying another person’s share following separation
- Supporting an eligible family property purchase
- Education or other significant planned costs
- Repaying certain existing borrowing
Lenders may restrict some purposes. They may also request quotations, bank statements or evidence showing how the money will be used.
Borrowing for improvements does not guarantee that the property will rise by the same amount. Consider the practical benefit alongside any expected increase in value.
For older homeowners, equity release versus remortgaging for home improvements explains how the two arrangements differ.
What should you check before remortgaging?
Early repayment charges
Leaving a fixed or discounted mortgage early may trigger an early repayment charge.
Compare this charge with any potential saving before changing lenders.
Mortgage and legal costs
Possible costs include:
- Product or arrangement fees
- Valuation fees
- Legal or conveyancing costs
- Broker fees
- Electronic transfer charges
- Early repayment charges
Some products include free valuations or standard legal work. This does not automatically make them the cheapest option.
Affordability
A lender will normally review income, expenditure, dependants, debts and financial commitments.
Borrowing more may increase the monthly payment, mortgage term or total interest charged.
Credit history
Missed payments, high credit utilisation or recent borrowing may affect lender choice.
Reviewing your credit records before applying can reveal incorrect or outdated information.
Remaining mortgage term
Extending the term can reduce the monthly payment. However, it may increase the total interest paid.
The lowest monthly payment is not always the lowest-cost outcome.
Is debt consolidation through a remortgage suitable?
A remortgage may sometimes be used to repay credit cards, loans or other debts.
This can reduce the number of monthly payments. However, it converts unsecured borrowing into debt secured against the home.
A lower mortgage rate can still produce a higher total cost when the debt is repaid over many years.
Before consolidating debt, compare:
- The amount required
- Existing interest rates
- Remaining repayment periods
- Fees and early settlement charges
- The proposed mortgage term
- Total interest payable
- The effect on household resilience
Independent debt solutions may also be available. A remortgage should not be treated as the automatic answer to financial pressure.
Should you remortgage when your property value increases?
A valuation increase is a reason to review the mortgage, not a reason to borrow automatically.
The review should compare:
- Staying with the current mortgage
- Taking a product transfer from the existing lender
- Remortgaging to another lender
- Requesting a further advance
- Using savings instead of secured borrowing
- Postponing the change until an early repayment charge ends
Later-life homeowners may also need to compare remortgaging with downsizing or a regulated lifetime mortgage.
Read about downsizing, remortgaging or equity release before choosing a later-life borrowing route.
Frequently asked questions
Does a higher property value guarantee a better mortgage rate?
No. A higher value may reduce your LTV, but lenders also assess affordability, credit history, property suitability and product availability.
Can I remortgage immediately after my home increases in value?
Possibly. However, some lenders have minimum ownership periods. An early repayment charge may also apply to your current mortgage.
Can home improvements support a higher valuation?
Completed improvements may affect the valuation when they improve the property’s condition, size or marketability. Their cost does not guarantee an equal increase in value.
Is a product transfer the same as remortgaging?
No. A product transfer changes the mortgage product with your current lender. A remortgage usually replaces the existing mortgage with one from another lender.
How early should I review my mortgage?
You can often begin reviewing your options several months before the current deal ends. The available booking period varies between lenders.
Reviewing the value behind the numbers
A home can increase in value while remaining the same place to the person living there.
The financial meaning appears when that value is measured against the mortgage balance, future costs and household plans.
A lower LTV may create more choice. Responsible borrowing begins by deciding whether that choice improves the full financial position.
A mortgage adviser can compare available products, costs and lending criteria. They can also assess whether additional borrowing is suitable.
Explore our remortgage advice before changing your existing mortgage.
Your home may be repossessed if you do not keep up repayments on your mortgage or other loans secured against it.
