80% LTV Mortgages

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80% LTV Mortgage

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The loan to value ratio of a mortgage indicates how much of your property you own outright (covered by your deposit, and commonly known as equity) and the amount you are borrowing (covered by your mortgage), expressed as a percentage.

Therefore, an 80% LTV mortgage means that you are borrowing four fifths of the value of the property.

Example:

For example, if you were to buy a property worth £500,000 on an 80% LTV mortgage, you would pay a deposit of £100,000 and borrow the remaining £400,000 in the form of the mortgage.

Who is eligible for an 80% LTV mortgage?

An 80% LTV mortgage means that you are moving towards the higher end of the mortgage LTV spectrum, and while this can make getting a mortgage more affordable and realistic for those who don’t have a substantial deposit, it does mean missing out on the best low rate deals such as those offered for 50% and 60% LTV mortgages.

However much or little you wish to borrow, there are certain criteria that you will need to fulfill in order for your application to be successful.

If you apply for an 80% LTV mortgage, lenders will consider criteria such as:

• Your earnings – Do you earn enough to borrow the amount you want?
• The stability of your income – Are you self-employed or new in a job?
• Your outstanding debts – How much debt do you have?
• Your credit rating – Have you ever missed a mortgage payment or other repayment in the past? Do you have any County Court Judgements (CCJs) against you? Have you even been bankrupt?

How much will an 80% LTV mortgage cost?

A mid-range LTV mortgage, such as an 80% LTV mortgage, will generally be cheaper than mortgages with the highest LTV.

Mortgage lenders generally offer better rates for people who have a significant deposit, or equity in their current home, to put towards the purchase value of a new property. There are various interest rate options available, including:

• 80% LTV fixed rate mortgage – your interest payments are fixed for a set period of time (usually several years) after which you will be moved on to another rate
• 80% LTV standard variable rate mortgage – your interest will vary with your lender’s mortgage rate
• 80% LTV tracker mortgage – your interest rate will move up or down by tracking an external rate, such as the such as the Bank of England Base Rate