If you are already the owner of a property, whether it’s a family home of your own or a buy to let in your name, you will no doubt see it as an investment. It goes beyond putting a roof over your head, it will be your largest asset and you’ll either want to sell it at some point or pass it on through the generations.
The property market is always going through changes and fluctuations, with there being times that you will see property prices in Coventry soar high.
During peaks times such as these, it may be a good idea for you to take a look at your options for a remortgage in Coventry, as doing so may see you be able to access a much more favourable loan to value, which in turn can mean better rates of interest.
Loan to value (LTV) is the ratio of your mortgage to the value on the property market, expressed as a percentage. As an example of this, if you were to purchase a property for £100,000 with a 10% (£10,000) deposit, you will require a 90% loan to value mortgage on it.
Mortgage loan to values will be broken down into tiers and brackets. Typically speaking, the lowest bracket will be 60%, then increasing to the highest ratio of 95%. The brackets and tiers offered will vary across the different mortgage lenders.
If you are able to get a lower loan to value, you will have access to a wide range of mortgage deals with much more competitive rates of interest.
Taking the above-mentioned example and fast forwarding many years ahead, you may find that your property in Coventry has now grown in value to £110,000, with your initial £90,000 mortgage balance reducing to £80,000. This means that you will have a new loan to value of 73%.
From here, if you were able to take out a remortgage in Coventry, you would likely have access to a 75% loan to value mortgage, which should be able to offer you a more competitive rate of interest.
Of course there are other factors to bear in mind, such as the condition of the market, that impact interest rates when you look at a remortgage in Coventry.
Lower loan to value mortgages in Coventry will typically have that lower rate of interest, because it shows that you are much less of a risk to the mortgage lender.
Of course, in order for you to be able to access the better rates or to set better terms, you also need to see if your property is worth more than you initially paid for it and if so, what is the value of it now. In order for you to be able to do this, you need to have a valuation taken out.
When you take out your remortgage in Coventry, you will be going through the process of moving onto a new mortgage, with a brand new mortgage lender. If you were to take out a product transfer in Coventry, you would be taking out a new mortgage with the same mortgage lender.
Again, referring back to the risk for a mortgage lender, because you are with a new mortgage lender, they will need to know exactly what your property is worth, before the lend to you. There are typically two types of property valuation that you will come across.
The first of these is an Automated Valuation Model (AVM), which may also be called a desktop valuation. In taking out one of those, you won’t have a physical visit to your property, with instead it being a database that will look at similar properties in the area, before it determines the value.
The alternative to having one of these taken out is a physical valuation, in which someone makes a physical visit to your property, inspecting both the inside and outside, in order for them to determine the true value of the property themselves.
This is something that will be especially useful if you have made any home improvements or extensions, that other properties in that location maybe haven’t had. This is something you are welcome to bring up with a mortgage advisor in Coventry, if you would prefer that to be taken into account.
Whilst you may be able to use the equity within your home to access better mortgage deals, there may be times in which you wish to remortgage in Coventry and release that equity. This is something many homeowners do, with the most popular choice being to remortgage for home improvements.
When you take out a remortgage to release equity, you will need to be careful about what you are doing. In virtually every circumstance, you will take out a new mortgage to replace the previous mortgage (as is the case with a remortgage in Coventry), but you will be going up to a higher loan to value.
Because you have yourself a higher loan to value, you will also see your monthly mortgage payments increasing as well.
Many homeowners will be hoping that making an investment in your home and having all the different home improvements you wish to have done, your home will have gone up in value, meaning that when you next remortgage in Coventry, you’ll find yourself on a lower loan to value again.
It’s all about making market predictions and having a well-thought out plan, especially when you are handling what is no doubt your largest financial investment, in your home. A trusted mortgage advisor in Coventry will be able to best advise on the approach to take in your particular situation.
From time to time, you may actually wish to remortgage in Coventry earlier than you otherwise would. Whilst remortgaging is normally done “early”, before your fixed-term is due to end, you may be able to do this even earlier, sometimes even a year earlier.
The downside to remortgaging in Coventry early, is that you will most likely have to pay an early repayment charge (ERC), as you will be exiting a contractually agreed term with your mortgage lender, breaking your agreement with them.
It can be difficult to predict how house prices are going to be, so you never quite know what the property market is going to look like at any given time. What could seem like a good idea for you at the time, could actually not be financially viable for you.
People will only generally leave their mortgage in Coventry early, if they absolutely must, if their reason is good enough. It would always be recommended that you get the opinion of an expert mortgage broker in Coventry, before looking to do something like this.
An example of this could be the COVID-19 pandemic, where the Bank of England base rate plummeted to record lows. Because this happened, people who were set to remortgage in Coventry once their fixed-rate period ended were able to benefit from this and inherit lower interest rates.
Homeowners who perhaps had a year or so to go still likely would not have benefitted from these drops, unless they chose to remortgage in Coventry early, then fixing in for a longer period to keep it low. Mortgage lenders did pull a lot of products during this time, so it is a niche example.
Even with that in mind, it demonstrates an example of where taking out a remortgage in Coventry early, could be financially beneficial. If you have seen your home go up in value, you may also see the benefit in remortgaging in Coventry early, as doing so can see you access a lower loan to value.
This may outweigh the possible costs of an early repayment charge, though remember that this will still be a factor, unless you are doing a product transfer, in which case a mortgage lender may waive that fee. In addition to this, you may also have arrangement, valuation and solicitors fees to pay.
If you are able to showcase that what you are saving are able to outweigh the possible costs, it could be worth looking at. That said, it should only be looked at if absolutely necessary, so speak to a mortgage broker in Coventry before looking at this.