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Why Property Values Drop Before a Remortgage

Property prices can decrease for a range of reasons, including:

• Local market slowdown
• National economic conditions
• Recent sales of comparable properties at lower values
• Changes to the property condition or maintenance
• Reduced demand for certain property types
• Surveyor adjustments to bring valuations in line with recent data

A drop in valuation doesn’t mean you can’t remortgage — but it may affect the products and LTV bands available.

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How Lenders Assess Property Value During a Remortgage

When remortgaging, lenders usually require a valuation. This can be:

• A desktop valuation
• A drive-by valuation
• A full physical survey

The method depends on the lender’s risk policy, property type and loan amount.

The valuation determines the loan-to-value (LTV) of the mortgage, which directly affects pricing and product eligibility.

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Why a Lower Property Value Matters

If your property is valued lower than expected, this may lead to:

1. A Higher Loan-to-Value (LTV) Ratio

Example:
If you expected the property to be worth £300,000 but the valuation comes in at £270,000, your LTV rises.

Higher LTV = fewer lender options and potentially higher rates.

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2. Reduced Ability to Borrow Additional Funds

If you planned to raise additional capital during the remortgage, a lower value may reduce how much you can borrow.

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3. Being Placed in a Different LTV Band

Common bands include 60%, 75%, 80%, 85%, 90%.
Dropping into a higher band may affect product choice.

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4. Potential for Negative Equity

Rare but possible if property prices fall significantly.
Negative equity means the mortgage is higher than the property value, limiting remortgage options.

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What to Do If the Valuation Comes Back Lower Than Expected

1. Check Whether the Valuation Is Reasonable

Ask yourself:

• Do recent sales locally support the valuation?
• Has anything changed about the property condition?
• Were upgrades expected but not completed?
• Is the estimate based on comparable properties?

Surveyors must use evidence from the local market.

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2. Request a Reconsideration (If Justified)

Some lenders allow you to challenge a valuation if you can provide:

• Evidence of comparable sales
• Proof of upgrades or improvements
• Mistakes in property details

Reconsiderations are assessed case by case.

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3. Consider Remortgaging at the New LTV

If the new LTV is still manageable, you may proceed with:

• A slightly higher rate
• More limited product options
• Short-term adjustments to manage the change

Many borrowers still secure competitive deals despite reduced valuations.

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4. Reduce the Loan Amount

If possible, lowering the loan amount may bring the LTV down to a better band.

This can be done by:

• Making an overpayment
• Using savings
• Reducing how much equity you release

A small overpayment can sometimes achieve a better rate.

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5. Stay With Your Current Lender (Product Transfer)

If remortgaging becomes difficult due to the valuation:

• Staying with your current lender
• Switching to a new fixed or tracker deal

…may be an easier option, as product transfers usually do not require a valuation.

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6. Work on Reducing Debt Before Trying Again

Debt reduction can improve affordability and reduce risk, making it easier to secure a remortgage even at a higher LTV.

This is general information only.

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7. Wait for Market Conditions to Improve

Property markets fluctuate. A later valuation may come back stronger if market confidence improves.

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What If You Fall Into Negative Equity?

If your mortgage balance exceeds the property value, your options include:

• Staying with your current lender on a new rate
• Overpaying if affordable
• Waiting for equity levels to recover
• Avoiding additional borrowing for now

Lenders are unlikely to approve a remortgage elsewhere until the loan amount aligns with the property value.

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How Lenders Handle Borrowers With Reduced Property Values

1. Lenders Still Primarily Assess Affordability

Even with a lower valuation, strong income and stable finances help maintain options.

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2. Bank Statement Conduct Matters

Underwriters check:

• Spending patterns
• Overdraft usage
• Returned payments
• BNPL activity
• General financial behaviour

Clean conduct strengthens the overall case.

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3. Credit Profile Still Plays an Important Role

A lower value combined with weak credit may reduce lender choice further.
Good recent conduct helps compensate.

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Common Scenarios and Lender Responses

Scenario 1: Property value falls slightly (less than 5%)

Usually manageable; may affect rate but not eligibility.

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Scenario 2: Property value drops enough to shift LTV band

May reduce options; lender comparison becomes important.

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Scenario 3: Property value significantly lower than expected

Borrowers may opt for a product transfer or reduce borrowing.

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Scenario 4: You are in negative equity

Staying with the current lender is likely the only option.

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Scenario 5: You planned to release equity

A reduced valuation may mean you can’t release as much, or at all.

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How to Strengthen Your Position Before a Valuation

(General Information Only)

Borrowers commonly take the following steps:

1. Ensure the property is presented well

Clean, tidy and maintained properties may support a stronger valuation.

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2. Prepare evidence of improvements

Receipts, photos and completion certificates can help if upgrades were made.

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3. Reduce overall debt levels

Helps with affordability and risk assessment.

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4. Keep bank statements clean

Avoid unarranged overdrafts or inconsistent spending.

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5. Ensure credit files are accurate

Correcting errors can improve scoring and lender confidence.

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When a Specialist Lender May Be Appropriate

A specialist lender may assist if:

• The valuation places you in a high LTV band
• Your credit profile is complex
• You need manual underwriting
• You have significant financial changes
• The property type is harder to value

Specialist lenders can take a more flexible approach to risk.

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Summary

If your property value dropped before remortgaging, you still have several viable options. Lenders primarily assess:

• Your new loan-to-value
• Affordability and income stability
• Credit profile
• Bank statement conduct
• Property condition and market comparables

Even a lower valuation does not prevent you from securing a new deal — but it may influence product choice and affordability.

This article provides general information only. For personalised guidance, regulated mortgage advice is required.