Spellman Financial Services

What is LTV in Mortgages?

What is loan to value?

Loan to value in Mortgage terms is the percentage of your Mortgage in comparison to your property value.

Loan to value example:

Property purchase of £200,000

And a Mortgage of £180,000

Equals a loan to value of 90%. Because the Mortgage is 90% of the value of the property.

The £20,000 difference would be your deposit. In this case the deposit would be 10%.

Why Loan to Value is important

If Mortgage Lenders need to repossess your property due to you not being able to keep up with repayments on your Mortgage.

The smaller the Mortgage is in comparison to your property value, the greater chance your Mortgage Lender has of getting the Mortgage back.

This is why the bigger your deposit is, the smaller your interest rate will be that you pay to the Lender in comparison to those with a smaller deposit.

What is a good loan to value ratio?

To get the best deals, generally you will have to have around a 25% deposit. Which would be 75% loan to value.

This is a unrealistic target to most First Time Buyers, unless you are purchasing a new build property through the Help to Buy Scheme.

This is because you’re 20-40% (depending where you’re buying) equity loan can be used toward your deposit.

In recent years many have been able to obtain a Mortgage with a 5% deposit (95% LTV).

This is still the case in some instances. So it is worth speaking with a Mortgage Brokers to see if this is still doable.

The current minimum deposit in many cases will be 10% (90% LTV).

Need to knows

Having a high loan to value isn’t just a risk to Mortgage Lenders.

There is also a risk to yourself of falling into something called negative equity. 

Equity is the same as your deposit.

Negative equity is where you do not have any equity or deposit in your home. So your Mortgage is a higher value than your home is worth.

This happens when the value of your property falls to a level below your Mortgage.

I.e. Mortgage of £180,000 and a property value of £170,000.

Why use ourselves?

We can provide face to face advice to customers in Coventry & Warwickshire. Or a telephony/video call service if you prefer, for Local or National Customers.

Luke Spellman, the Mortgage Broker you will speak to, has over 10 years experience in Financial Services. 5 of which has been spent working directly with Mortgages.


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