Are you a first-time homebuyer or a seasoned property investor in the UK? Regardless of your experience level, understanding key mortgage terms is critical when it comes to making informed financial decisions. One term that you’ve likely come across in your research is “LTV mortgage,” but what exactly does it mean? As a specialist mortgage broker, I’m here to break it down for you and explain how it can impact your mortgage application and overall borrowing costs. So, let’s dive in and explore the world of LTV mortgages together.
LTV Mortgages
You may have heard of the term “loan to value” (LTV) in the realm of mortgages or come across lenders quoting LTV figures in various mortgage deals. If you’re wondering why it matters and how it can impact your mortgage experience, you’ve come to the right place.
Understanding the concept of LTV is crucial, as it directly affects the cost of your mortgage and determines the maximum amount you can borrow. In simpler terms, LTV represents the proportion of your property’s value that you need to borrow from a lender. The lower the LTV ratio, the more favourable it is for you as a borrower. Throughout this article, we will delve deeper into the concept of loan to value, unravel its significance, and shed light on why it plays a pivotal role in your mortgage journey. So, let’s dive in and uncover the inner workings of LTV mortgages together.
Post Topics
What is a good LTV ratio in the UK?
How loan to value is calculated?
How to lower your loan to value?
What factors should you consider when choosing an LTV mortgage?
What are the different LTV mortgages?
FAQs- Mortgage Loan to Value Bands
How We Work
1: We contact you and take down your details, income outgoings, name, address etc.
2: We will research the whole market and email you a detailed quote as well as a list of documents to proceed.
3: You upload the documents and information needed via our channel our online portal.
What is a good LTV ratio in the UK?
First-time buyers typically have a higher loan-to-value (LTV) ratio than home movers, which means that their monthly payments are higher. The average LTV ratio for first-time buyers is 82%, compared to 74% for home movers.
However, it is important to note that not all first-time buyers have a high LTV ratio. In fact, the average deposit for first-time buyers is around £43,400 on an average property price of £217,000. This is an LTV ratio of 80%.
From 2016-2018, first-time buyers paid an average of £760 per month on their mortgage, compared to £681 for those remortgaging.
How loan to value is calculated?
Loan to value is calculated by using the figures of the purchase price of a property, your deposit amount and how much loan you require to borrow as your mortgage.
You can calculate this yourself by taking the price of the property and subtracting the deposit amount you have. This will leave you with the amount you will require as a mortgage loan. Then you take the mortgage loan amount and divide it by the price of the property and multiply this figure by 100 to get the loan to value percentage.
For example:
Price of property = £200,000
Deposit amount = £20,000
Price of property (£200,000) – Deposit amount (£20,000) = Mortgage loan amount (£180,000)
Mortgage loan amount (£180,000) ÷ Price of property (£200,000) = 0.9
0.9 x 100 = loan to value of 90%
What is a loan to value?
Loan to value is a term used in all types of mortgages, whether you are buying your first property or remortgaging. Loan to value is expressed as a percentage and it’s a ratio of the price of the property you intend to purchase or remortgage and how much a lender is going to loan to you as a mortgage. Loan to value can have an effect on how much you can borrow and the interest rate you can have access to. Generally, a lower loan to value is more advantageous to lenders as it means the borrower is borrowing less on their mortgage and lowers the risks for a lender.
Once you know your loan to value, you are able to find out the mortgage deals you qualify for.
First time buyers may find themselves stepping onto the property ladder with a high loan to value as it is likely they will have a small deposit to put down. Fortunately, there are lenders who provide mortgages tailored for first time buyers.
Buy to let mortgages can be seen as higher risks to lenders so they generally carry a lower loan to value percentage when compared to a standard residential mortgage. Typically, lenders will require you to have a loan to value of 75% or less.
How to lower your loan to value?
Higher loan to value is deemed as higher risk as the monthly payments will be higher which can increase chances of default. For lenders, if a borrower defaults, they would have to sell the property in order to get their loan back and if property prices has decreased, this can lead to the property having negative equity and the lender may not be able to recoup all their money back from the sale. Valuations are carried out to ensure the standard of the property and underwriters will assess the property before agreeing to the loan.
A lower loan to value percentage is more desirable so the lower it is, the better it is for you in terms of mortgage options. Having a lower loan to value will unlock a wider range of mortgage lenders and products available to you to choose from. As the risks are lowered for a lender when a mortgage is offered on a lower loan to value, interest rates will be more competitive.
Credit score can have an impact on loan to value. Generally, if you have a good credit history, you should be able to borrow on a higher loan to value ratio as you are deemed as a less risky borrower. Those who have lower credit scores or have any adverse credit history may find that lenders are only willing to offer a mortgage at a lower loan to value therefore will need a bigger deposit.
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What is Ltv Mortgage?
An LTV mortgage, or loan-to-value mortgage, is a type of mortgage where the amount of money you borrow is a certain percentage of the value of the property you are buying. For example, if you have an LTV mortgage of 80%, this means that you are borrowing 80% of the value of the property and putting down 20% as a deposit.
LTV mortgages are available in a variety of different forms, including standard mortgages, high-LTV mortgages, and specialist mortgages. The type of LTV mortgage that is right for you will depend on your individual circumstances and financial situation.
Here are some of the key things to know about LTV mortgages:
LTV stands for loan-to-value
This is the percentage of the property’s value that you are borrowing. For example, if the property is worth £200,000 and you have an LTV mortgage of 80%, this means that you are borrowing £160,000 and putting down a deposit of £40,000.
The higher your LTV, the more risky you are considered to be by lenders
This is because there is a greater chance that you may default on your mortgage if the value of the property falls. As a result, lenders will typically charge you a higher interest rate on an LTV mortgage than they would on a standard mortgage.
There are a number of different types of LTV mortgages available
Standard LTV mortgages typically have an LTV of 80% or lower. High-LTV mortgages have an LTV of 90% or more. Specialist mortgages are designed for borrowers with specific needs, such as borrowers with bad credit or borrowers who are self-employed.
It is important to shop around for the best LTV mortgage deal
Different lenders will offer different interest rates and terms, so it is worth comparing your options before you make a decision.
If you are considering an LTV mortgage, it is important to speak to a mortgage broker. A mortgage broker can help you to find the best mortgage for your needs and can also help you to negotiate the best interest rate.
What factors should you consider when choosing an LTV mortgage?
There are a number of factors to consider when choosing an LTV mortgage, including:
- The size of your deposit. The size of your deposit will have a big impact on the interest rate you are offered on your mortgage. Lenders will typically charge a higher interest rate on mortgages with a lower deposit, as they are considered to be more risky.
- Your credit score. Your credit score will also affect the interest rate you are offered on your mortgage. A good credit score will show lenders that you are a reliable borrower and are likely to be able to repay your mortgage on time.
- The length of your mortgage term. The length of your mortgage term will affect your monthly repayments. A longer mortgage term will mean lower monthly repayments, but you will pay more interest over the lifetime of the mortgage.
- Your affordability. It is important to make sure that you can afford your monthly mortgage repayments. You should also factor in other costs, such as stamp duty and legal fees.
- Your individual circumstances. There are a number of other factors that you may need to consider, such as your income, your employment status, and your family circumstances.
If you are considering an LTV mortgage, it is important to speak to a mortgage broker. A mortgage broker can help you to find the best mortgage for your needs and can also help you to negotiate the best interest rate.
Here are some additional tips for choosing an LTV mortgage:
- Shop around. Different lenders will offer different interest rates and terms, so it is worth comparing your options before you make a decision.
- Don’t be afraid to negotiate. Lenders are often willing to negotiate on interest rates, so it is worth asking for a better deal.
- Consider a fixed-rate mortgage. A fixed-rate mortgage will give you peace of mind knowing that your interest rate will not change for a certain period of time.
- Take out mortgage protection insurance. Mortgage protection insurance will pay off your mortgage if you are unable to work due to illness or death.
- Make sure you understand the terms and conditions. Before you sign on the dotted line, make sure you understand the terms and conditions of your mortgage. This includes the interest rate, the repayment period, and any early repayment charges.
What are the different LTV mortgages?
There are a number of different LTV mortgages available, each with its own advantages and disadvantages.
Standard LTV mortgages
Standard LTV mortgages are the most common type of mortgage. They typically have an LTV of 80% or lower. This means that you will need to find a deposit of at least 20% of the property’s value. Standard LTV mortgages tend to have lower interest rates than high-LTV mortgages.
High-LTV mortgages
High-LTV mortgages have an LTV of 90% or more. This means that you will need to find a deposit of less than 10% of the property’s value. High-LTV mortgages tend to have higher interest rates than standard LTV mortgages.
Specialist mortgages are designed for borrowers with specific needs. For example, there are specialist mortgages available for borrowers with bad credit, borrowers who are self-employed, and borrowers who are buying a buy-to-let property.
It is important to choose the right LTV mortgage for your needs. If you have a large deposit, you may be able to get a standard LTV mortgage with a lower interest rate. However, if you have a small deposit, you may need to consider a high-LTV mortgage or a specialist mortgage.
It is also important to remember that the interest rate on your mortgage is not the only factor to consider. You should also consider the length of the mortgage term, the monthly repayments, and any early repayment charges.
Next steps
In conclusion, an LTV mortgage is a type of mortgage where the amount of money you borrow is a certain percentage of the value of the property you are buying. The higher your LTV, the more risky you are considered to be by lenders, and as a result, lenders will typically charge you a higher interest rate on an LTV mortgage than they would on a standard mortgage.
There are a number of different types of LTV mortgages available, including standard LTV mortgages, high-LTV mortgages, and specialist mortgages. The type of LTV mortgage that is right for you will depend on your individual circumstances and financial situation.
If you are considering an LTV mortgage, it is important to speak to a mortgage broker. A mortgage broker can help you to find the best mortgage for your needs and can also help you to negotiate the best interest rate.
How We Work
1: We contact you and take down your details, income outgoings, name, address etc.
2: We will research the whole market and email you a detailed quote as well as a list of documents to proceed.
3: You upload the documents and information needed via our channel our online portal.
FAQs- Mortgage Loan to Value Bands
What is loan to value or LTV for a mortgage?
In simple terms, LTV is a calculation of how much a lender is prepared to lend you based on the cost of the property you want to buy or remortgage. It’s calculated by dividing the total amount of the mortgage by the current market value of the property. The result is then multiplied by 100 to give the percentage figure. The higher the number, the higher the LTV and the more expensive the mortgage but If you have a higher deposit amount, you can easily get a low mortgage rate. It is also worth noting that mortgage rates vary with a different mortgage lender.
What loan to value ratios are there?
There are three main types of loan to value ratios: 80%, 65% and 50%. This means that the maximum amount you can borrow is 80, 65 or 50 per cent of the property’s current market value respectively. These figures are used because lenders use them to calculate whether they will accept your application and what type of mortgage they will offer you. They also work out how much monthly payments you can afford to pay each month. There are other variations within these ranges too.
How loan to value (LTV) ratio affects your mortgage?
The lower your LTV, the cheaper the mortgage. However, the higher your LTV, the more expensive the mortgage. You could end up paying more than double the price of the house just to cover the difference between the two amounts. So, if you can afford a £200,000 home, but only have a £100,000 deposit, you might struggle to get a mortgage with a 75% LTV. Irrespective of all these, there are other factors like your credit rating that also affects the mortgage application.
What is loan to value (LTV) ratio?
LTV stands for ‘loan to value’ and refers to the proportion of the purchase price of a property that you would need to put down as a deposit before being granted a mortgage. For example, if you were planning to buy a property costing £200,000 and wanted to borrow £150,000, the LTV would be 75%. This means that you would need to put a minimum of £75,000 into the property as a deposit. You can get a better mortgage deal if you have a lower LTV ratio.
How do I calculate my loan to value ratio?
To calculate your LTV, divide the total amount of the proposed mortgage by the current market price of the property. Multiply this by 100 to arrive at your LTV. In our example above, we would divide £150,000 by the current market price, which gives us 75%. We multiply this by 100 to arrive a figure of 750. Therefore, our LTV is 75%.
What is a good loan to value ratio in the UK?
A good loan to value ratio is around 70-80%. A high LTV means you will have to make larger deposits and pay more interest over time. But, it also means that you will be able to get a lower interest rate. On average, a person needs to save about 25% of the purchase price of their new home to finance the rest. This means that a £50,000 deposit will take about four years to build up.
What is the maximum LTV a mortgage lender will allow?
Some lenders won’t even consider lending more than 90% of the property total value. Others may limit it to 85% or 80%. Some lenders even go as far as 70%. However, some lenders will not let you apply for a mortgage unless you have a minimum LTV of 60%.
Which loan to value ratio should I go for?
It depends on your circumstances. If you want to move quickly, then a low LTV is best. It will mean that you don’t have to save so much money upfront. The downside is that you will probably have to pay more interest overall. Also, you will have less equity in the property when you eventually sell it. If you have a large family and want to live close together, then a higher LTV is better.
What happens to my LTV if the value of my house drops?
If the value of your house falls, then your LTV will increase. Your LTV will rise because you will still owe the same amount of money, but the cost of the house has gone up.
How does my LTV ratio affect remortgaging?
When you remortgage, your LTV will drop. This means that you will have less debt to repay, and therefore, less interest to pay. You will also have more equity in your home. This means that you can potentially borrow more money, which will help you reduce your monthly payments.
What are the different LTV thresholds for mortgages?
The LTV threshold differs depending on whether you are buying a first-time buyer’s discount or an enhanced discounted rate. There are three main types of mortgage: standard variable rates, fixed rates and tracker rates. Each type of mortgage has its own LTV threshold.
About The Author
Damian is an experienced mortgage broker, founder of NeedingAdvice.co.uk Ltd and company director. With over a decade working as a mortgage broker he has a strong understanding of hard to place mortgage cases. With hundreds of 5 star client reviews. hundreds of repeat clients his work speaks for himself.
He started NeedingAdvice.co.uk as a one man band with the philosophy of putting clients needs ahead of his own. This ethos of offering excellent customer service has helped the business grow over the years. He gets satisfaction on getting cases pushed through to offer stage where other mortgage broker and companies have failed.
Throughout his time as an adviser he has carved out a niche area of advice helping clients with their business protection requirements too. Having helped hundreds of client with Relevant Life Policies, Shareholder Protection Insurance, Keyperson Policies and other important protection requirements of large to small businesses.
At home he is a family man and likes to spend his time with his four children and wife Lisa. He enjoys going on holidays spending time with friends and going for walks.
What is loan to value or LTV for a mortgage?
In simple terms, LTV is a calculation of how much a lender is prepared to lend you based on the cost of the property you want to buy or remortgageRefinancing an existing mortgage with a new mortgage.. It’s calculated by dividing the total amount of the mortgage by the current market value of the property. The result is then multiplied by 100 to give the percentage figure. The higher the number, the higher the LTV and the more expensive the mortgage but If you have a higher deposit amount, you can easily get a low mortgage rate. It is also worth noting that mortgage rates vary with a different mortgage lender.
What loan to value ratios are there?
There are three main types of loan to valueThe ratio of the mortgage amount to the value of the propert... ratios: 80%, 65% and 50%. This means that the maximum amount you can borrow is 80, 65 or 50 per cent of the property’s current market value respectively. These figures are used because lenders use them to calculate whether they will accept your application and what type of mortgage they will offer you. They also work out how much monthly payments you can afford to pay each month. There are other variations within these ranges too.
How loan to value (LTV) ratio affects your mortgage?
The lower your LTV, the cheaper the mortgage. However, the higher your LTV, the more expensive the mortgage. You could end up paying more than double the price of the house just to cover the difference between the two amounts. So, if you can afford a £200,000 home, but only have a £100,000 deposit, you might struggle to get a mortgage with a 75% LTV. Irrespective of all these, there are other factors like your credit rating that also affects the mortgage application.
What is loan to value (LTV) ratio?
LTV stands for ‘loan to value’ and refers to the proportion of the purchase price of a property that you would need to put down as a deposit before being granted a mortgage. For example, if you were planning to buy a property costing £200,000 and wanted to borrow £150,000, the LTV would be 75%. This means that you would need to put a minimum of £75,000 into the property as a deposit. You can get a better mortgage deal if you have a lower LTV ratio.
How do I calculate my loan to value ratio?
To calculate your LTV, divide the total amount of the proposed mortgage by the current market price of the property. Multiply this by 100 to arrive at your LTV. In our example above, we would divide £150,000 by the current market price, which gives us 75%. We multiply this by 100 to arrive a figure of 750. Therefore, our LTV is 75%.
What is a good loan to value ratio in the UK?
A good loan to value ratio is around 70-80%. A high LTV means you will have to make larger deposits and pay more interest over time. But, it also means that you will be able to get a lower interest rate. On average, a person needs to save about 25% of the purchase price of their new home to finance the rest. This means that a £50,000 deposit will take about four years to build up.
What is the maximum LTV a mortgage lender will allow?
Some lenders won’t even consider lending more than 90% of the property total value. Others may limit it to 85% or 80%. Some lenders even go as far as 70%. However, some lenders will not let you apply for a mortgage unless you have a minimum LTV of 60%.
Which loan to value ratio should I go for?
It depends on your circumstances. If you want to move quickly, then a low LTV is best. It will mean that you don’t have to save so much money upfront. The downside is that you will probably have to pay more interest overall. Also, you will have less equityThe difference between the value of the property and the amo... in the property when you eventually sell it. If you have a large family and want to live close together, then a higher LTV is better.
What happens to my LTV if the value of my house drops?
If the value of your house falls, then your LTV will increase. Your LTV will rise because you will still owe the same amount of money, but the cost of the house has gone up.
How does my LTV ratio affect remortgaging?
When you remortgage, your LTV will drop. This means that you will have less debt to repay, and therefore, less interest to pay. You will also have more equity in your home. This means that you can potentially borrow more money, which will help you reduce your monthly payments.
What are the different LTV thresholds for mortgages?
The LTV threshold differs depending on whether you are buying a first-time buyer’s discount or an enhanced discounted rate. There are three main types of mortgage: standard variable rates, fixed rates and tracker rates. Each type of mortgage has its own LTV threshold.
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