Can I Remortgage If My House Value Has Dropped?

How a Property Value Drop Affects Your LTV

When your property value falls, your loan-to-value (LTV) ratio increases because your mortgage balance now represents a larger proportion of your home's worth. This is the opposite of what happens when property values rise, and it can push you into a higher LTV band where interest rates are less competitive.

For example, if you have a 180,000-pound mortgage on a home that was worth 250,000 pounds (72% LTV) and the property drops to 220,000 pounds in value, your LTV rises to approximately 82%. This moves you from the 75% LTV bracket to the 85% bracket, where rates are typically higher and fewer deals are available.

In more extreme cases, a significant property value drop can push your LTV above 90% or even into negative equity — where you owe more than the property is worth. This makes remortgaging much more difficult, though not always impossible.

Your Remortgage Options When Values Have Fallen

If your property value has dropped but your LTV is still below 90%, you should still be able to remortgage, though you may not get as good a rate as you had hoped. The key question is whether the available rates at your new, higher LTV are still better than your current rate or your lender's SVR. In most cases, they will be.

A product transfer with your existing lender can be a good option in this situation. Because you are staying with the same lender, they may not require a new valuation, which means the property value drop may not affect the rate they offer you. This is worth exploring as it sidesteps the valuation issue entirely.

If your LTV has risen above 90%, your options become more limited but are not non-existent. Some specialist lenders offer mortgages at 90% to 95% LTV, though the rates will be higher. A mortgage broker with experience in higher LTV lending can help you identify what is available.

Improving Your Position Before Remortgaging

If a property value drop has pushed your LTV higher than you would like, there are steps you can take to improve your position. Making overpayments on your current mortgage — if your deal allows it — will reduce the balance and bring down your LTV. Even small regular overpayments can make a difference over time.

If you have savings, you could use them to pay down a chunk of the mortgage before remortgaging. This is particularly effective if it would move you across an LTV threshold. For instance, paying off 5,000 pounds to move from 81% LTV to 79% LTV — crossing the 80% boundary — could unlock significantly better rates that more than compensate for the cash used.

You might also consider waiting if your deal has not yet expired. Property values can recover, and if you have time before your deal ends, the market may improve. However, do not wait too long if it means falling onto the SVR, as the higher SVR rate could cost you more than the difference between LTV brackets.

What to Do If You Cannot Remortgage

If your property value has dropped so much that you cannot find a new lender willing to take you on, you still have options. Your existing lender will almost always offer you a product transfer, as they already have the mortgage and the risk. The rates may not be the best on the market, but they should be better than the SVR.

You can also focus on paying down your mortgage balance to improve your LTV over time. If you are on the SVR, any money you save by cutting other expenses and directing it towards mortgage overpayments will gradually bring your LTV down and improve your options for the future.

In the most difficult situations — particularly negative equity — it is worth seeking professional advice from a qualified mortgage adviser or a free service like Citizens Advice. They can help you understand your options and ensure you are taking the best course of action for your circumstances.