Financial Mortgage Advice

Should I get my house valued to remortgage?

Do you need to get your house valued for a remortgage?

Taking out a mortgage on a house is one of the biggest financial commitments you are likely to make, and it’s important to know that you don’t have to stick with the same deal or the same lender forever.

Remortgaging is when you move from one mortgage deal to another.  When you remortgage, you can stay with your current lender or move to a new one if they’re offering a better deal.

Like you would for your broadband or energy provider, you should shop around to make sure you get the best deal possible. To do this, you can go directly to a broker who can tell you the best deals available to you.

There are multiple reasons a person might choose to remortgage. For example:

  • Potential to reduce overall monthly mortgage payments.
  • It can be used to help pay off your mortgage earlier.
  • Raise capital by releasing funds from your home.
  • Take advantage of low interest rates.
  • Get the option to make overpayments.
  • Move from interest only to a repayment mortgage.

Below you’ll find everything you need to know about the remortgage valuation process and what you do or don’t need to do:

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Why could it be a good idea to value a house for a remortgage?

The amount a bank is willing to lend to you and how much interest they will charge is dependent on your house value.

Your “Loan to Value” (LTV) is the amount of the mortgage you have compared to the value of your property.  For example if you have a mortgage of £100,000 and a house value of £200,000 then you have a 50% LTV.  The lower your LTV is then the cheaper mortgages become.  This is because banks are willing to charge you less as the loan is less risky for them; there is more equity in the house if they end up needing to repossess.

Assuming that you want your mortgage to be as cheap as possible it’s a good idea to do everything you (legally!) can to lower you LTV.  With houses prices tending to rise over time there is a chance that your property value has increased since the original mortgage, and a higher house value will potentially result in a lower LTV and therefore a cheaper mortgage.

One reason to get a valuation is to protect against any unfortunate surprises when the bank does it’s own valuation.  If the bank decided that the value is lower than in your application then that could result in you needing a bigger deposit, paying more for your mortgage or potentially unable to get the mortgage you applied for.

A good broker will be able to guide you through the process and explain how the above works in your particular situation.

How do you value a house for a remortgage?

There are several ways in which you can get a valuation for your property for a remortgage with several fairly easy to do options.  However, please bear in mind that the valuation used in the mortgage will be the one produced by the bank’s surveyor and even if it varies wildly from your own valuation there is little that can be done to challenge the bank’s valuation.

  • If you have moved into your property in the last few years then it might be as simple as looking up the regional house price increases and multiplying the purchase price by the average increase for each year.  However, house price increases can vary considerable within regions so this method may not be the most accurate.  An even more rough rule of thumb that is often used is to simply add on 5% to the value for each year.  But again whilst this is fairly simple it is not going to be very precise.
  • You can see what comparable property’s are for sale in your area and how much they are for sale for.  Online estate agents such as Rightmove or Zoopla make this type of research fairly easy to undertake.  The sale price is not going to be the same as the actual sold price, but on average they tend not too be too far off.   You can add recently sold properties as well to get a better idea of prices, as those currently for sale often end up selling for a different amount than the advertised price.  If you can find recently sold properties similar to yours then this will give you an initial idea of how much your property could be worth. If you are unable to find any comparable properties then this can be a little more difficult.
  • There are a few more specialised online sites that can be very useful for property valuations. They can give you the current property prices as well as the historic value for what the property sold for. This will show you every house that has sold down your road and the price paid. These websites get their information from the land registry and therefore are very accurate.  However you should be aware that they do not tend to show any houses that have sold in the past 6 months as it takes this long for the land registry to update their information.  A brilliant example of one of these websites is Mouseprice.
  • Use an Estate Agent.  This one is a bit more tricky in a few ways.  On the one hand having a professional give a current valuation after viewing your property should be likely to give you the most accurate valuation, and a local estate agent should be familiar with the local area and the price that properties go for.  However, this will not be a mortgage valuation and is likely to be inflated as estate agents often complete with other for business by offering to put it on the market at a higher level than their competitors.  It is also worth noting that your local Estate agent is not likely to want to value your property for remortgaging purposes, they will only have an interest if they think you are planning to put the property on the market.
  • Take an educated guess.  You after all are familiar with your house and the area.  With a combination of the above or just using a gut feeling you can estimate your property value.

At the end of the day, it’s not the end of the world if the estimated valuation of your property is slightly out. When the new lender carries out a mortgage valuation you will then get an accurate idea of its true value.

If you have carried out any large home improvement projects on your property, for example, putting in new kitchens or bathrooms or perhaps having an extension done this can all be a little more tricky. You would like to think that your property will have increased in value by at least the amount you have spent, however this is not always the way.

Decoration and smaller projects do tend to increase the properties value by at least the amount you have spent and quite often more. Unfortunately larger projects like extensions and putting rooms in the loft do not tend to increase the value to such a degree. Sometimes it doesn’t even increase it by as much as you have spent on the home improvement itself.

Does it cost to get your house valued?

All those house prices on Rightmove and Zoopla are created by seasoned professionals working hard to provide value to their clients. So how much does all this cost you?  The short answer is nothing at all!

Valuations provided by estate agents are usually free because they know it’s a great time to view the property, pitch their services and sell themselves to you. It’s called customer contact time, and it’s a key part of the estate agent business model.  The properties and prices are then uploaded to sites like Rightmove where they are available to members of the public free of charge.

Who does charge for valuations?  There are a few times when you might have to pay for a valuation, though. A valuation conducted by a RICS surveyor might cost between £150 to £800, depending on where you are located and the size and the value of the property.  Or potentially cost thousands for a very specialist survey into something structural.  You might need one if you have taken out a Help to Buy: Equity Loan.

Banks also charge for valuations that are related to mortgages.  Some mortgages come with Free Valuation though it’s rarely makes a difference to what mortgage you end up choosing.  For a basic mortgage valuation the bank will usually charge somewhere between £100 and £300 although this can vary between banks.  However, if the initial surveyor comes across anything that they believe needs to be looked at then the bank will insist that you pay for the extra survey work to be done.  For example an initial survey by the bank could find a crack in the property which could be subsidence.  they may refuse to proceed unless you pay several thousands of pounds for a specialist subsidence survey.

Do valuations cost the estate agent?  Valuations do take a bit of research; the estate agent must research the local property market and how properties in that street and that area are selling. Many use specialist software to track this and can offer a reasonably accurate initial valuation, but this software does haves a price (although this is usually a per-month cost, not a per-use cost).

The agent takes between 20 to 60 minutes for most properties, depending on how complex it is and whether there is a good history of sales in the area.  Next they have to travel to the property to accurately assess it. While software provides a useful start, you cannot value a property without seeing it because much of the property’s value depends on its state and its liveability factor. If, for example, a property has been gutted prior to renovation so it’s no longer in a liveable state, its value falls. If, however, it’s finished to an extremely high standard and it has a nice extension, its value typically increases. 

Then there’s the time to view the property, sell the estate agent’s services and all the other parts that a valuer is expected to do. This typically takes between 30 minutes and 60 minutes.  So just for one valuation, it takes perhaps two to three hours of the estate agent’s time. Software expenses, office time, coffee and other small factors such as lighting, computer time and additional expenses involved with employing the valuer add even more.

As a result, for 3 hours’ work, you could be looking at £80 to £150 worth of costs to the estate agent.

Do I have to get my house valued before a remortgage?

No, you don’t need to get your property valued prior to getting a remortgage.  You will, however, need to know roughly what the market value is before you start your remortgage. 

The value of your property partly determines how much a bank will lend to you and at what rate; the knowledge that the bank has the value of the property to fall back on is one of the reasons that mortgages are cheap compared to other lending (credit cards etc) and so it’s an key piece of information.

The bank will perform a valuation and if you don’t want any surprises then it’s a good idea to perform your own work beforehand to work out the value.

There are some cases where it may not be necessary (for example a very low LTV) but given it is very straightforward these days to find a rough idea of your property value online it may be worth a quick look in any case.

Mortgage valuations vs house surveys

A mortgage valuation is essential for the lender as it helps them decide how much they are willing to lend for you to purchase it.  However, its important to note that a mortgage valuation is not the same as a house survey.

A house survey is a service you pay for that comes in various levels of depth and detail, which can point out potential issues that could affect your purchase or future resell value of the property.  Be aware that even if you pay for a mortgage valuation via your lender, there’s no guarantee you will see the valuation report or find out what the surveyor has told the lender, so think about the level of risk you wish to proceed with.

A mortgage valuation is a brief visit that often won’t include a look inside the property, which is why a survey is the only way you can guarantee finding out if there are issues such as damp, structural issues, or other concerns that could affect the value of the property now or later.

There are four main types of survey: A mortgage valuation survey (which is what this article is mainly about), a condition report, a homebuyer report and a building survey (sometimes called a full structural survey).  You can arrange a survey by getting in touch with a local RICS accredited surveyor.

Where can I find out more?

Your mortgage broker will not only have to have studied the different types of valuations and surveys as part of their initial and ongoing training, but they will be familiar with the process having dealt with a large number of mortgages (all of which require a valuation, and many which have a survey).  They should be happy to answer any questions you may have and possibly recommend someone to undertake the survey.

And if the valuation does come back for lower than was anticipated then your broker will have the experience to work out what the best next steps would be.

Please get in touch if you have any questions, we are always happy to help.

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Give us a ring for a Free no obligation discussion on how we may be able to help you: 01173 823 823

Drop us a line with any query you may have and we'll make sure we get back to you as quick as we can: contact@leafifa.co.uk