Remortgaging When Your House Value Increases: Your Options

One of the most common questions on r/UKPersonalFinance is:

“Should I remortgage as my house value has increased?”

Many homeowners are often confused by their options, and whether remortgaging could save them money or unlock potential further borrowing, but aren’t sure if the hassle, fees, or lender valuations are worth it. As one Redditor put it:

“Assuming you stay with the same lender, you’ll need to pay for a valuation, pay for the mortgage application and pay an early redemption charge.”

The reality is that when your property increases in value, your loan-to-value (LTV) ratio may improve, which opens the door to potentially cheaper mortgage rates which may result lower monthly payments. An increase in your property value may also mean you can borrow further funds against your home (depending on the LTV), but it’s not always straightforward and sometimes the benefits are marginal.

This blog breaks down your options, the pros and cons, and when remortgaging makes sense.

How Rising House Prices Affect Your Mortgage

Your mortgage product is heavily influenced by your loan-to-value (LTV) ratio – the percentage of your property’s value that you’re borrowing. For example:

• If you owe £150,000 against a £200,000 property, your LTV is 75%. If the property then increases to £250,000, your LTV drops to 60%.

Why does this matter? Lenders often offer their most attractive rates at lower LTV brackets as you are deemed a lower risk to the lender.

One Redditor explained:

“If you pass a LTV threshold then it would mean lower interest.”

That said, others noted the savings can sometimes be small:

“Marginal gains though. 60% LTV was only 0.25% better than at 95% LTV at 5 years fix — 5.39 vs 5.64.”

However, it’s worth mentioning that the difference in interest may seem small, but over a longer period, the actual savings may be far larger. For example, on a £200,000 mortgage over 25 years, if we were to use the above example of the interest rate dropping from 5.64% to 5.39% this would result in an approximate saving of £30 per month.

Your Main Options When Your House Value Increases

1. Remortgage to a New Mortgage Deal with a Better Rate

If your new valuation drops you into a lower LTV bracket, you may qualify for a lower interest rate.

• Pros: Lower monthly repayments, potential savings over the mortgage term.
• Cons: Early repayment charges (ERCs) if you are remortgaging early, potential costs involved with arranging a new mortgage product.
• Best when: You’re near the end of your fixed term, or the rate reduction is large enough to justify fees.

2. Lower Your Monthly Payments

Instead of keeping mortgage payments the same and paying more capital off your mortgage, you can opt for lower monthly payments.

• Pros: Lower monthly repayments = more disposable income each month.
• Cons: You may not be paying as much towards reducing your mortgage balance, meaning you are going to pay this over a longer term.

3. Shorten Your Mortgage Term

Another option is to keep monthly payments roughly the same but reduce the length of your mortgage.

• Pros: Pay off your mortgage faster, potentially saving thousands in interest.
• Cons: Less flexibility if your circumstances change as you will be committed to a higher mortgage payment on a monthly basis.

4. Release Equity (Borrow More)

Remortgaging can also be used to increase your borrowing, taking advantage of the extra equity you have in the property. Be mindful that this is not the same as equity release, which is a different product for older applicants later in life.

• Pros: Access to further borrowing for home improvements, other property purchases, or consolidating unsecured debts. Mortgage rates are often cheaper than interest rates offered on personal loans or credit cards.

• Cons: Higher mortgage amount, larger monthly payments, and more interest paid over the term of the mortgage. If house prices fall, your loan to value will be impacted and in some extreme cases could cause negative equity.

When It Makes Sense to Remortgage & When to Wait

Good times to remortgage:

• You’re within 6 months of the expiry on your current mortgage product (to avoid early repayment charges).
• Your new valuation reduces, moving you into a lower LTV bracket.
• You want to lock in a lower rate before interest rates rise further.

When to wait:

• Early repayment charges payable outweigh potential savings.
• Lender valuations are too conservative compared to market values.
• You’re planning to move or sell soon.

Speak to a Mortgage Broker If You're Unsure

Wondering whether to remortgage your home if the value has increased can be a complex decision. If you’re unsure or want to talk through your options, speaking to a broker could be beneficial.

While remortgaging can unlock cheaper products and lower monthly payments, it may not be the right option for you and may impact your long-term financial future. As the Reddit discussions show, some homeowners save thousands, while others find the gains too small to justify the effort. The key is to run the numbers carefully and think about how your mortgage fits your life plans.

Connely Roberts Mortgage Services offers specialist advice on remortgaging for contractors and self-employed people. If you’d like to talk through your remortgage options, reach out to our team today.