Investing in a property represents a significant financial commitment and is likely to stand as the most substantial investment in your lifetime. Whether you intend the property to be your new residence or a buy to let for others, the expectation is that its value will appreciate over time.
Beyond its financial significance, a property serves as not only your largest asset but also as the shelter for you and your family. It may even play a role in passing down through generations or helping family members in their property ventures.
While house prices generally tend to rise, occasionally there might be a slight dip due to economic factors.
For property owners, especially during periods of soaring housing prices, opportune moments for remortgaging may present themselves. It’s worth considering this option even earlier than your usual remortgage timeline.
During phases of escalating housing prices, the market often offers the most attractive interest rates. To ensure you capitalise on the best available rates, exploring your remortgage options and potentially securing a new deal becomes a prudent move while the market presents such favourable opportunities.
This proactive approach can prove beneficial in optimising your mortgage terms and securing a more advantageous financial position.
Loan to Value, often referred to as LTV, denotes the proportion of the mortgage amount in relation to the property’s value. When looking at your mortgage options, LTV is expressed as a percentage.
For instance, if you’re acquiring a property in Nottingham valued at approximately £250,000 and providing a 10% deposit (£25,000), you would be seeking a 90% LTV mortgage.
Mortgage deals are typically categorised into various tiers or brackets, with the lowest usually starting at around 60% and the highest reaching 95%.
It’s important to note that not all lenders include 95% LTV mortgages in their offerings; some, especially specialist lenders, may stipulate a minimum deposit requirement, such as a 10% deposit for a 90% LTV mortgage.
While individual circumstances can influence the available mortgage options, as a general rule, a lower LTV often translates to more advantageous mortgage deals.
Looking ahead, if your property’s value increases from £250,000 to £270,000 and your initial mortgage balance decreases to £225,000, your new Loan to Value would be 83%. A decreasing LTV over time typically grants you access to more competitive mortgage rates.
The rationale behind the more favourable interest rates associated with lower LTV mortgages lies in the reduced risk you pose to the lender. As your LTV diminishes, you become a less risky borrower, enhancing your eligibility for mortgage products with more attractive terms.
Many are unaware that there are two distinct types of remortgage in Nottingham: a straightforward remortgage and a product transfer.
Starting with the latter, a product transfer involves obtaining a new mortgage product from the same lender and simply transitioning to a different deal. This option is suitable for those who prefer to stick with the same lender, irrespective of the interest rate offered.
On the other hand, if you opt to remortgage in Nottingham, you’ll be securing a new mortgage product with a different lender. Exploring various deals with different lenders often exposes you to competitive mortgage rates.
As a mortgage broker in Nottingham, we are well-equipped to guide you through the remortgage process and help you in finding a suitable product tailored to your unique personal and financial circumstances.
Similar to when you initially purchased the property, your property will undergo a valuation process during the remortgage. There’s no need for a property survey, such as a homebuyer’s report or a full structural survey.
The mortgage valuation aims to determine the accurate value of the property. Your lender will conduct this valuation in one of two ways: using an Automated Valuation Model (AVM) or through a physical inspection.
An AVM, also known as a desktop valuation, involves cross-referencing databases to estimate the value based on similar properties in the area, without a physical inspection. However, AVMs may overlook certain factors.
If you prefer a physical valuation, communicate your preference to your mortgage advisor in Nottingham, and they can relay this information to your lender. In a physical inspection, someone will visit the property in person to conduct the valuation.
For lenders, it’s a risk management game. They must ensure they lend against the true value of the property to avoid lending more than necessary.
Possessing equity within your property plays an important role in reducing your Loan to Value (LTV), which, as you’re aware, can potentially unlock access to more favourable remortgage rates.
Despite this advantage, some property owners may contemplate releasing equity through a remortgage in Nottingham to utilise the funds for other ventures. However, it’s essential to understand that releasing equity may lead to an increase in your monthly payments.
This is a consequence of extracting equity from your property, resulting in an uptick in your LTV. The feasibility of remortgaging in Nottingham to release equity depends on various factors, including your financial situation and the stage of your mortgage term.
Opting to invest the released equity in home improvements has the potential to enhance the value of your property.
As experienced mortgage brokers in Nottingham, we’ve witnessed clients undertaking projects like garden enhancements, loft conversions, and kitchen extensions, contributing to a notable boost in their property’s worth.
While some individuals aim to increase their property’s value, many invest in home improvements to enhance their day-to-day living conditions. For instance, if your family is expanding and you require additional space, remortgaging to release equity for a loft conversion could be a viable option.
Given that a property represents a substantial financial asset, it’s key to comprehend the positive aspects and benefits of releasing equity.
Our team of remortgage advisors in Nottingham is ready to provide expert guidance and help tailored to your specific needs. Feel free to reach out for advice on your remortgage journey.
Whether or not to remortgage early is contingent upon your current position within the mortgage term. Initiating a remortgage prematurely may incur an early repayment charge (ERC) due to the breach of your initial contract term.
Our stance is that early remortgaging is advisable only if you are unequivocally certain that it aligns with your optimal financial strategy. There are instances, however, where early remortgaging, particularly when your property’s value has appreciated, can grant access to more favourable interest rates.
Despite the potential ERC, this approach might lead to long-term savings on your new rate. An illustrative example occurred during the unconventional circumstances of the COVID-19 pandemic.
The reduction in the Bank of England base rate made early remortgaging opportune, securing a more advantageous rate. Although an ERC was incurred, the prospect of long-term savings on the new rate justified this decision.
While this scenario is a distinctive case from an unusual period, it underscores the occasional advantages of paying the ERC through early remortgaging to achieve financial savings.
We strongly recommend speaking with our proficient remortgage advisors in Nottingham before pursuing early remortgaging, ensuring that you are exploring the most advantageous deal available.
Our commitment is to transparently and candidly guide you, recommending the optimal solution tailored to your personal and financial circumstances.
Date Last Edited: January 18, 2024