The value of your property can go down, as well as up. This means when you come to switch your mortgage you could be assessed on a higher loan to value (LTV), which reduces you chances of successfully remortgaging.
The loan to value is the amount you borrowed (or if you’re remortgaging, the amount left to pay back) compared with the value of the property. For example, if you borrowed £160,000 to buy a £200,000 home, your LTV would be 80%.
But if your home had gone down in value to £175,000, but there was still £150,000 left on the mortgage, your LTV is more than 85%.
This is particularly a problem for people who were able to take out 100% or 120% mortgages before the credit crisis.
Being in negative equity will also cause problems when it comes to remortgaging. This is where the amount outstanding on your mortgage is more than value of the property.