Increased value of house - can I remortgage?

gk112

Hi everyone

This is my first time posting - great to be dipping my feet in the water.

So, we bought our house 18 months ago for £270,000 on a mortgage of 243,000 ie 90% LTV. It was just about to be repossessed and was in a pretty dire state, but we've been doing it up over the last year (reading the MSE DIY forums along the way) and now it's finished and worth approx £350,000. Other, identical houses in the road have sold for £350,000 - £400,000 in the past 12 months but I'm going with the low end of the scale!

My question is, if our house is now worth £350,000 and my mortgage hasn't reduced much from £243,000, can I remortgage my house on a LTV of 70%? I'm hoping for a big saving on the interest rate which we fixed for 5 years at a pretty high 6.19%.

Or would we actually have to SELL the house for £350,000 for the mortgage company to believe the new valuation? We aren't planning on moving

Any help gratefully received

beecher2

You wouldn't have to sell to remortgage, but have a look at the ERC you'd have to pay - if it is a % of your mortgage it could be hefty.

gk112

Thanks Beecher2.

Yeah, the ERC is pretty hefty early on ie 5% of the outstanding amount in the 1st year, 4% in the 2nd year, etc. I guess that's the price you pay for certainty over your payments.

I'm keen to know how they would value the house - if they used a computer model based on the last selling price it would probably only value the house at £275000ish. Would they come round and see the house?

blueberrypie

gk112 wrote: »

I'm keen to know how they would value the house - if they used a computer model based on the last selling price it would probably only value the house at £275000ish. Would they come round and see the house?

Sometimes they do, sometimes they don't. It depends on the lender, the area, the amount you're borrowing, and probably a few other factors too.

somethingcorporate

You would likely have to pay to have someone come out and value it, otherwise the valuation would be a simple market-based one and not take account of the value you have added.

liubeliu

I would have thought the valuer would look up Land Registry prices and notice how much paid for it and probably value it the same. How long was the house on the market, the valuer can access this data from Rightmove (the part EA and surveyors can access). If a while i.e. more than a few months and sale price was £270K then in todays tighter market he might value less than £270K as any lender will want it valued so if repossessed would want to sell within 1 month.

gk112

Thanks guys

The house was for sale for about 2 years and due to the poor condition it dropped significantly in value over that time. So I guess a market based valuation could be pretty low, unless the other house sales in the street have boosted it. It would be pretty interesting to see what a bank would value it at now, but due to the high early repayment charge we'll probably just stick it out until the 5 year fixed rate is over.

But paying for a valuation might be worth it once the 5 years is over

Thanks for all your help everyone

hcb42

yes you will be able to remortgage subject to usual criteria

dimbo61

You are stuck with your 5 year fix so the best thing you can do is overpay each month and reduce your mortgage debt.