Owning a property, whether it’s your family home or a buy to let in Harrogate, is seen as a valuable asset. It goes beyond providing shelter; it’s a substantial investment that can be sold or passed down to future generations.
The property market is dynamic, with prices fluctuating over time. During periods of price increases, it can be beneficial to explore remortgage options, as you may have the opportunity to access more favourable loan-to-value ratios and better interest rates.
Loan-to-value (LTV) is the ratio of the mortgage amount to the property’s market value, expressed as a percentage. For example, if you buy a property for £100,000 with a £10,000 deposit, you’ll need a 90% LTV mortgage.
Different mortgage lenders offer varying LTV brackets, typically ranging from 60% to 95%. Lower LTV ratios allow access to mortgage deals with more competitive interest rates.
Let’s say your property value has increased to £110,000, and your outstanding mortgage balance is now £80,000. This results in a new LTV of 73%. By remortgaging in Harrogate, you could potentially secure a 75% LTV mortgage with a more competitive interest rate.
Market conditions also influence the interest rate available at the time of remortgaging in Harrogate. Lower LTV mortgages tend to have better interest rates because they present less risk to the mortgage lender.
To access better rates or terms, you need to establish whether your property’s value has increased since you purchased it. To do this, a valuation of your home will be necessary.
When you remortgage in Harrogate, you’ll be switching to a new mortgage lender, unlike a product transfer where you remain with the same mortgage lender.
As a new mortgage lender, they will require a valuation to determine the property’s value against which they are lending. Two types of property valuations will typically be found.
The first is an Automated Valuation Model (AVM), also known as a desktop valuation. It involves cross-referencing similar properties in the area to estimate the value without a physical inspection.
The alternative is a physical valuation, where an expert visits your property to assess its interior and exterior, providing a more accurate value. This method is particularly useful if you have made home improvements or extensions that an AVM might overlook.
You can discuss your preference with your mortgage advisor in Harrogate during your appointment.
Sometimes, homeowners choose to remortgage in Harrogate to release equity. This means taking out a new mortgage with a higher loan-to-value ratio. It’s important to be cautious when considering this option. With a higher LTV, your monthly mortgage payments may increase.
The goal is to invest in home improvements, which would hopefully see an increase in the property’s value. This strategy aims to lower the loan-to-value ratio when you remortgage in Harrogate in the future.
It’s essential to devise a well-thought-out plan, especially when dealing with a significant financial investment like your home. A mortgage advisor in Harrogate can guide you in determining the best approach for your situation.
In some cases, homeowners may think about remortgaging in Harrogate before their fixed-term ends, even as early as a year in advance. It is important to remember that breaking the agreed terms of your mortgage contract usually means paying an early repayment charge (ERC).
Predicting house prices is challenging, and the market’s conditions can be uncertain. While remortgaging in Harrogate early may seem attractive, it might not be financially viable for everyone. People typically consider early exit from their mortgage when there’s a good reason to do so.
In such cases, it’s highly recommended to involve a mortgage broker in Harrogate.
For instance, during the COVID-19 pandemic, when the Bank of England base rate reached record lows, homeowners at the end of their fixed-rate mortgage period had the opportunity to benefit from lower interest rates through remortgaging in Harrogate.
If you were a year away from that point, however, you could only take advantage of this by remortgaging in Harrogate early and fixing the mortgage for a longer period. This is a unique example from an unusual time, as mortgage lenders also limited product availability, reducing options for many borrowers.
Nevertheless, it demonstrates a scenario where early remortgaging could provide financial benefits. If your home’s value has risen, it could be an opportune time to remortgage in Harrogate, as the savings from accessing a lower loan-to-value ratio may outweigh the associated costs.
Please do keep in mind the potential early repayment charge, as well as arrangement, valuation, and solicitor fees for the new mortgage. To fully understand your options, it’s recommended that you speak with a mortgage broker in Harrogate.
Last Edited: 18/05/2023