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Original poster

Mortgage renewal

5 replies

Pob13 · 07/03/2018 08:22

I am after some clarity as I cant get my head around loan to value, etc.
Our mortgage is up for renewal and we have added a pretty good amount of value to the property through renovations. Will we be able to get a better mortgage deal because our loan to value is now better + our house is now worth more?
We are seeing the bank on friday but want to get my head around it first.
Any advice very much appreciated.

OP posts:
nellly · 07/03/2018 08:32

Yes your house is now worth more so assuming your asking for the same amount in mortgage amount your loan to value rate will increase.
Say you bought your house for £100k (I know, unlikely but it's a nice round number)
You put down £10k so you 'owned' 10% of your house in equity. The bank 'owned' the rest.

You've put loads of work in and now it's worth £200k! Now you own £110k in equity.

In the first scenario if the bank has to foreclose on you and they don't get a good price/ house is auctioned/damages etc they might not get all of their money back, in the second scenario there is a lot more margin for error and they will almost certainly get all their money back.

The lower risk you are to them the better interest rate you get.

Hope that makes sense!

nellly · 07/03/2018 08:34

The only thing I would add actually is that it goes in bands.

So owing less than 95% gets you one interest rate, then 90%, 80% etc.

For my re mortgage I was really close. They said if I put in £450 of cash I moved from 75.1% to 74.9%. (Can't remember exact figures) but basically it pushed me down a bracket and meant I got a better deal.

Original poster
Pob13 · 07/03/2018 14:27

Thankyou that really helps

OP posts:
JoJoSM2 · 07/03/2018 15:18

The only thing is that it will probably involve a full application with a valuer coming round and I think they’ll go through your finances again. There might be the associated fees involved.

Alternatively, you can just change the mortgage with the existing lender without any of that.

So you need to work out if the uplift in value and the new LTV will secure a better rate. It’ll be the case if you go from 90% to 80% but going from 60% to 50% would only cost you a bunch of fees but the rate wouldn’t change.

VacantExpression · 08/03/2018 10:05

See an independent broker for a good mortgage deal and he/she can talk you through all the jargon too, and the different products available at different LTV's

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