- What is LTV (and are 95% LTV mortgages possible?)
- A Handy Video Guide To LTV
- A 5% house deposit (or 95% LTV mortgage) – A message from an advisor
- LTV (Loan-To-Value) Table Guide
- Low Deposit Mortgages (options if you have a 5% deposit)
- First Steps To Getting A Mortgage
What is LTV (and are low deposit mortgages possible?)
So you’ve saved up a big old chunk of savings for your house deposit (congrats!) but what’s next?
When you use a mortgage to buy a home, you’ll be looking at mortgage product suitability, along with other criteria, by what’s known as the LTV or Loan-To-Value. It’s pretty much what it sounds like – the proportion of the total cost of the property that will be covered by your mortgage loan.
Whilst there are products out there that may be suitable. It’s important to understand what differences you’ll see between say a 95% LTV, 90% LTV and 85% LTV product. There may be differences in the interest rate that make it worthwhile waiting it out – but your Mortgage Buddy Advisor can help you with that.
5% Deposit Mortgages
Our expert advisors are extremely up to date on all things mortgages and with access to the whole-of-market, they get a good insight into what products are currently available.
Here’s what they had to say:
Due to COVID-19 and uncertainty for lenders, almost all lenders are looking for at least a 10% deposit for products where applicants have clean credit, unless it is a product like help-to-buy equity loans where a 5% deposit may be viable. The products are changing daily so advisors are always aware of changing availibility and this is particularly useful for high LTV products as they may be there one day and gone by the end of the week so applications need to be done quickly.
(4th December 2020)
So for now, higher LTV (Loan-To-Value) mortgages are much more difficult to access HOWEVER, there are options.
Loan-To-Value (LTV) Table
Here’s a useful tool to help you visualise what LTV you may be looking at. For this example, we’ve used a house valued at £100,000 as a model.
No (or Low) Deposit Mortgage Options
When an advisor looks into your application there are loads of things they will need to consider. This is why we recommend taking a no-obligation initial conversation, even if you aren’t ready yet. You’ll get an idea of how you can proceed and when, and you’ll learn plenty of things that no mortgage calculator can tell you!
Your options if you have a 5% deposit could include:
- Help-to-Buy Mortgages – A popular alternative, these can require as little as a 5% deposit. The scheme offers applicants an equity loan that lets them borrow for an interest-free deposit. Buyers are able to repay this equity loan at any time without any additional charges. If you don’t repay, when you sell, the government will take a stake from the property’s current value. This scheme is restricted to new-build properties with a value under £600,000. There are lots of rules for this type of mortgage so it may be worth speaking to an advisor.
- Right-To-Buy Mortgages – Some lenders will allow applicants to use their right-to-buy discount as a deposit. This is, however, at the discretion of the lender and the relevant local authority.
- Guarantor Mortgages – Not as common this year, but this option would see a lender place a friend or relative’s savings in a savings account for a fixed amount of time as security against the mortgage. This again will vary between lenders and availability of these schemes is inconsistent in 2020.
- Gifted Deposits from Family and Friends – Sometimes borrowing funds from loved ones is an option; the caveat will be that lenders require a signed letter to say that the applicant will be under no obligation to pay this money back to the source of the deposit.
First Steps To Getting A Mortgage
Once you’ve got an idea of where you stand, we’d always recommend speaking to an advisor – even if you don’t go ahead right now.
They’ll be able to give you an idea of a reasonable and doable timeline for your mortgage application.
When you’re matched for free through Mortgage Buddy, your initial scoping conversations and advice from your advisor are free and no obligation. This stage is to analyse where you are, and if there are any bad-credit elements to your application that need to be allowed time to minimise the impact on your credit profile.
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