LTV calculation

theRman_2

Apologies if this question has been asked before but I couldn't find an answer during the search.

Here's the scenario:
- Assume that I buy a property for £100,000 and take an 80% mortgage fixed for 3 years.
- 3 years down the line my property's market value goes up and it is valued at £200,000, for the purposes of this question let's assume that I didn't repay any of my mortgage so my equity is still £20,000 and I owe the bank £80,000

My question is: if I renegotiate my mortgage at this point, does it mean that my LTV is now 40%? (£80,000 borrowed divided by £200,000 equity).

Appreciate your help on this!

Thrugelmir

Potentially yes.

Is it likely in the foreseeable future. No.

So not something to rely on.

pc1271

You're correct, but it goes both ways. If you bought a house 3 years ago at 80% LTV, it's more likely to have gone down in value, so your loan to value may be 85% now (ie you owe £80k on a house worth £95k).

This can be a real danger for first time buyers who may then struggle to remortgage.

HappyMJ

theRman wrote: »

Apologies if this question has been asked before but I couldn't find an answer during the search.

Here's the scenario:
- Assume that I buy a property for £100,000 and take an 80% mortgage fixed for 3 years.
- 3 years down the line my property's market value goes up and it is valued at £200,000, for the purposes of this question let's assume that I didn't repay any of my mortgage so my equity is still £20,000 and I owe the bank £80,000

My question is: if I renegotiate my mortgage at this point, does it mean that my LTV is now 40%? (£80,000 borrowed divided by £200,000 equity).

Appreciate your help on this!

In theory yes...but house prices doubling in 3 years is very unlikely unless you spend quite a lot more extending and renovating in that time.

theRman_2

Wow, I am impressed with how quickly you guys responded and how helpful you were. Thank you.

The numbers were fictitious, I just used them to come up with rounded and significantly different percentages but the scenario is real. My mortgage deal is due to end in 4 months and I wanted to understand how remortgaging works. I know that similar property prices in my area went up by a small but significant percentage so I wanted to understand whether that would affect my LTV calculation. If I read correctly your answers I can approach my current/another mortgage provider and request a new valuation and use that difference + the deposit I originally as part of the LTV calculation, is that correct?

Moomum

Yes, we have just remortgaged after being on interest only for two years. Our LTV has gone from 85% to 75% without any repayment of capital. We did do fair bit of work in the house though.

Thrugelmir

theRman wrote: »

If I read correctly your answers I can approach my current/another mortgage provider and request a new valuation and use that difference + the deposit I originally as part of the LTV calculation, is that correct?

You would need to pay for a new valuation. Value for mortgage purposes may be lower that selling asking price.

Land registry amongst other sites has details of actual sold prices.