How Do You Value a House for Remortgage?

Remortgaging a house is a popular tax-free way to extract built-up cash equity.

One of the fundamental processes any lender will follow is to assess the current market value. The extra amount that you can borrow against your property will be based on the result of these investigations.

How a Lender Will Value Your House for Remortgage

Valuing a property for remortgaging purposes is no different from when you initially took out your mortgage.

Essentially, the lender will essentially want to know the current value of the property relative to the purchase price or when it was last refinanced.

In this manner, you’ll be able to find out about any changes in the amount of equity you hold – along with the figure still to repay.  There are also legal, remortgage processing and early repayment charges to consider.

Different lenders will take different approaches to a remortgage valuation. Some will only undertake basic checks remotely, including research into changes in local and national house prices.

If this is done without an in-person visit to your home, it’s called a “desktop valuation”.  This is more common if you’re seeking a further advance – i.e. taking out extra borrowing from your existing lender (and not looking to swap).

Most lenders, however, will send a surveyor to your property to check its condition, features and local area amongst a range of other factors (see below).

You may well have undertaken a major renovation, refurbishment or even separated the property into individual units.  Here, with the high equity gains, there is a range of refinance options available.

How Should You Value Your House for a Remortgage

As the property owner already, you may well have a fair idea of what the value is already.

If not, it’s worth checking the range of free online tools that use HM Land Registry sold price data.  This, indeed, is a primary source of the property’s “digital footprint” that professional RICS valuers will use.

It’s worth understanding the wide range of factors a remortgage valuer will take into account when visiting your property.  These will often include:

• The property’s construction method and building materials used;
• The condition / structural integrity of the property;
• What improvements and value (such as extensions and/or loft conversions) have been done to the property;
• The size of the property, garden space and any extra land;
• Comparable property sale prices and where valuations may be heading in the future.  The valuer may also phone local estate agents to check properties that are Under Offer or Sold STC;
• Whether you have a garage, off-street parking and/or outbuildings;
• Any signs of serious defects, neglect or issues that could render the property unmortgageable;
• Roofing issues;
• Location and desirability of the property (including local amenities, infrastructure developments, planning applications / consents, school catchment area, transport links, buyer demand etc.);
• Checks on leasehold properties such as unexpired lease length, service charges / ground rents, cladding issues;
• The Energy Performance Certificate (EPC) rating and associated influences such as double glazing, cavity wall / loft insulation, heating, lighting;
• Well-functioning gas central heating, plumbing and electrics.

Will There Be Valuation Limits On the Remortgage?

In the aftermath of the Great Financial Crisis, lenders were legally required to be much more cautious about how and what they can approve (both for mortgage and remortgage purposes).

This means that the bank will want a certain amount of the borrower’s own money in the property.  This is known as the “loan to value” ratio and, in most cases, you will need a minimum of 25% equity as a “cushion”.

Having these kinds of parameters protect both you and the lender in the event of property price drops, thereby preventing a negative equity scenario.

Other factors that could affect the borrowable amount include:

• The current employment status of the mortgage holder(s);
• Net income position and whether this has changed;
• Amount of time it will take the borrower to pay off your remaining mortgage once you refinance;
• Your plans with the remortgage / further advance monies;
• Other “stress-tests” to make sure the remortgage money is well-protected.

Remember much will also be based on how much extra you’re looking to borrow.  If, for example, you’re simply remortgaging to access a better pay rate (with no further borrowing), and assuming your financial circumstances have not changed too much, there shouldn’t be any issues.

Has Your Remortgage Been Down Valued?

Should a surveyor / valuer visit your property and state a remortgage valuation that’s lower than your expectations, there are a few things you can do.

Remember that remortgage down valuations are fairly common, particularly as most surveyors tend to take a conservative approach.  This is because any signs of being overly optimistic on pricing could place risk on their adherence to Royal Institute of Chartered Surveyor (RICS) guidelines and affect their mandatory Professional Indemnity (PI) insurance premiums.

Your first port of call will be to talk to the mortgage broker or representative from the lender.  They will forward the report going through the valuer’s findings and supporting evidence.  It’s a good idea to look through this carefully (with an open mind) to see if there’s anything you disagree with.

The surveyor / valuer will typically be speaking to a mortgage underwriter.  In most cases, the valuer’s word is final but there are circumstances where you may be able to influence the decision for the better.

For instance, if you feel the comparable properties the surveyor has used are not similar, you can send examples of what you feel would be more appropriate.  Here, we would always recommend using properties that are actually sold and registered at the HM Land Registry.

Perhaps also there are issues the surveyor has concerns that you have since resolved.  You can send through photos and accompanying reports to support your case.

Regardless, it’s worth remembering that the surveyor / valuer has a legal obligation to respond to your enquiries.

Other times, if you feel strongly about the situation and are willing to pay the extra costs, you may choose to search out a different surveyor for a second opinion.

Considering Selling Instead? Contact Property Solvers…

If you’re thinking of simply selling your home (instead of refinancing), the team at Property Solvers would love to have a no-obligation chat.

We’re a multi-purpose quick sale company – offering fast cash sales, auctions and estate agency services.  Get in touch with us 24/7 and we’ll run through all your options…