Fixed rate coming to an end & house value increase

[Ayupchuck1]

Please could someone clarify this situation for me because I’m suddenly panicking that we won’t be able to afford our house soon!

We took out a mortgage for our house and fixed in for 3 years. The three years are coming to an end and we’re looking at re-fixing - either with same bank or switching to a different one.

Our house is now worth 50K more than what we bought it for (according to our bank’s recent online valuation).

Our income hasn’t increased since 3 years ago and, if we were buying this house for the first time now, we would not meet affordability criteria (we were close to our max affordability 3 years ago).

What situation are we in now? Does this mean we will need to downsize to a house we can meet the affordability checks for? Or is it different when we already have a mortgage on the house? LTV is currently 72%, if that makes any difference.

any insight would be appreciated!

You don't need to pay for the increase value of your house, you will only be borrowing whatever is outstanding from what you originally borrowed. If your house has gone up in value then this is only a good thing for you as it decreases your loan to value which in turn decreases your interest rate. You can sometimes re-mortgage a few months before your current rate expires without any penalties. It may be worth looking to do this before the rates increase any more!

You can product swap with your bank onto a new fixed rate and they rarely relook at your affordability. This might be an option.

DS1 is a mortgage advisor, so I just asked him - he says you’re best switching to a new product with your current provider, as it’s pretty automatic, and that you’d probably get a better rate that way than from other providers anyway.
(He mentioned Halifax & Barclays as being particularly good for existing customers).
You could ask a broker/advisor for advice - he says he does remortgage searches free as it’s a small job for him.

Thank you everyone! Really helpful responses :)

We refixed with the same provider recently. Our property valuation has increased by almost 50k so our loan to value improved and so now have more equity in the property and could access the better rates. It's a good thing if your property increases in value. If you stay with the same provider you don't need to go through affordability again.

You've paid off some of your mortgage whilst the house has also gone up in value. This means that your LTV may change depending on what you borrowed initially. It's a good thing!

You're not paying the price now, so it doesn't matter if it's trebled in value. You owe less than you did 3 years ago plus have more equity.

If it worked like this anyone doing a big reno would be kicked out afterwards. 😄