Should I Get My House Revalued Before Remortgaging?

Remortgaging involves replacing your current mortgage with a new one on the same property. Homeowners consider this process for various reasons, such as securing a more favorable interest rate, reducing monthly payments, or accessing home equity. A home’s value plays a significant role in these decisions, leading many to question whether a revaluation is beneficial or necessary before initiating the process.

The Role of Property Value in Remortgaging

A home’s value directly influences the Loan-to-Value (LTV) ratio, a central component in remortgaging. The LTV is calculated by dividing the outstanding mortgage loan amount by the property’s appraised value. For instance, a $200,000 mortgage on a $250,000 home results in an 80% LTV. A lower LTV generally indicates less risk to lenders, potentially leading to more attractive interest rates and better loan terms.

Conversely, a higher LTV might result in less favorable rates or even require private mortgage insurance (PMI) if it exceeds 80% for conventional loans. An increase in property value lowers the LTV, improving your financial standing with lenders. Increased home equity, the difference between your home’s value and your outstanding mortgage, can enable options like cash-out refinancing. This allows you to borrow a larger sum against your home’s increased value, converting equity into liquid cash for purposes such as home improvements or debt consolidation.

How Lenders Determine Property Value

When you apply for a remortgage, lenders will always conduct their own valuation to assess the property’s worth. This ensures the loan amount is appropriate for the collateral and helps calculate your LTV. Lenders employ several methods to determine property value, depending on factors like loan type, perceived risk, and market conditions.

Automated Valuation Models (AVMs) use complex algorithms to analyze vast amounts of data, including comparable sales, property characteristics, and historical price trends. AVMs offer speed and cost-effectiveness but lack a physical inspection, potentially missing unique conditions or recent unrecorded improvements.

Another method is a drive-by appraisal, where an appraiser inspects only the exterior of the home and relies on public records and comparable sales data. While faster and less expensive than a full appraisal, it offers a less comprehensive assessment of the interior. For a thorough evaluation, lenders may require a full appraisal, involving a physical inspection of both the interior and exterior of the home. The appraiser considers the property’s condition, features, and recent sales of similar homes to provide a detailed report.

Considering an Independent Appraisal

While lenders always perform their own valuation, homeowners might consider obtaining an independent appraisal in specific situations. This proactive step provides a clearer picture of your home’s market value, separate from the lender’s assessment. One beneficial scenario is after significant home improvements. Major renovations, such as a kitchen remodel, bathroom upgrade, or new roof, can substantially increase your home’s value beyond what public records or AVMs capture. An independent appraisal can document these upgrades and their impact, potentially supporting a higher valuation during remortgaging.

Another situation is if the lender’s initial valuation comes in unexpectedly low, especially if you believe it doesn’t accurately reflect the current market or your home’s condition. An independent appraisal can serve as strong supporting evidence to challenge a low lender valuation, though acceptance isn’t guaranteed. For unique properties or rapidly changing real estate markets, AVMs or drive-by appraisals may not be accurate, making an independent, detailed appraisal valuable for precise valuation. The cost of an independent appraisal typically ranges from $300 to $600 for a single-family home, varying by location, size, and complexity. This investment provides a professional, detailed valuation report, offering peace of mind and potentially strengthening your position in negotiations.

Maximizing Your Home’s Valuation

To ensure your home receives the highest possible valuation during an appraisal, strategic preparation is beneficial. Begin by thoroughly cleaning and decluttering all areas of your home, as a tidy space appears larger and better maintained. Address any minor repairs, such as leaky faucets, burnt-out light bulbs, or chipped paint, as these small fixes cumulatively impact an appraiser’s perception of the home’s overall condition. Enhancing curb appeal, through landscaping or a fresh coat of exterior paint, creates a positive first impression.

Gather and organize documentation of any significant home improvements you have made, including dates, costs, and details of the work performed. This could include new appliances, updated HVAC systems, or major renovations, as these additions can significantly increase appraised value. Ensure all areas of your home, including attics, basements, and garages, are easily accessible for the appraiser to inspect. While appraisers conduct independent research, it can be helpful to provide them with information on recent comparable sales in your immediate neighborhood, particularly if you are aware of similar properties that sold for a higher value.