The Question
I’ve nearly finished a two-year fixed rate and starting to look at remortgaging soon. I bought my property at the end of 2022, and it needed quite a lot of work. I’ve upgraded the kitchen, bathroom and redecorated throughout.
When I bought the property it was £325,000 and it’s now worth £375,000. Will this be taken into account when I remortgage?
Will the lender do a valuation and will the valuer assess the inside of the house as well? I’m hoping to get my loan value down and a better rate – so hoping for some good news!
Darren’s Answer
In short, yes. Home improvements can significantly impact your mortgage rate, especially when it’s time to remortgage.
Upgrading your kitchen, bathroom, and other areas can increase your property’s value, which can, in turn, improve your loan-to-value ratio (LTV). A lower LTV typically means better mortgage rates, as lenders perceive a lower risk in lending to you.
Given your property’s increased value from £325,000 to £375,000, you are likely to benefit from a better LTV. This increase in equity can put you in a stronger position when negotiating new mortgage terms.
If you opt for a product transfer with your current lender, they may conduct an external valuation to assess your property’s worth. However, these valuations might be conservative and not fully reflect the value added by your renovations.
If you’re not satisfied with your lender’s valuation, you can appeal the decision. Alternatively, when remortgaging with a new lender, an internal valuation will typically be conducted.
This comprehensive assessment is more likely to recognise the value of the improvements you’ve made, giving you a more accurate property value. The higher valuation can help you access better mortgage rates and terms.
Consulting with a mortgage broker can be beneficial in this scenario. They can provide guidance on whether a product transfer or remortgage is more advantageous based on current market conditions and your specific circumstances.
A broker can also assist in finding lenders who are likely to offer accurate valuations and favourable mortgage terms considering your property’s enhanced value.
In summary, home improvements can positively impact your mortgage rate by increasing your property’s value and improving your LTV. By carefully navigating the remortgaging process and leveraging your property’s enhanced value, you can secure more favourable mortgage terms and potentially lower your monthly payments.
Meet our expert…
Darren Polson is head of mortgage operations at Aberdein Considine. He has been writing a regular column for What Mortgage for over two years and is now here to answer YOUR questions.
If you have a question for Darren please email kate.saines@emap.com or leave a message in the comments below.
