Loan to Value ratio - the “LTV”
What is it?
The loan to value ratio is the expression in percentage terms of the amount you borrowed compared with the value of a property.
Hence, if your property is worth £100,000 and you borrow £70,000, the loan to value ratio is 70%.
Lenders like it when your loan to value is lower as they have more chance of recovering their money if you default on the loan. If somebody has a loan to value ratio of 90% (so borrowed £90,000 on a £100,000 property), there isn’t much leeway if the lender is forced to sell your property.
It is important to note that in most cases, if a lender is forced to sell your home because you do not keep up the repayments and they do not recover all that is owed, you still owe the amount not repaid by the house sale.
Lenders tend to put the loan to value ratio into bands and the lower the band you are in, the better rate you can achieve:
0 - 60%
60 - 75%
75 - 85%
85 - 90%
90%+
It will be very difficult - if not impossible - to find a mortgage for a loan to value ratio of 90% plus. Some people get around this by borrowing from family or by an unsecured loan to find this deposit. You must exercise extreme care if doing this - not only because you could be over committing yourself, but also because a lender could take a very dim view of this method.
Your home may be repossessed if you do not keep up repayments on your mortgage.
There will be a fee for mortgage advice. The precise amount will depend
upon your circumstances, but we estimate that it will be £500.
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Registered office: DTE House, Hollins Mount, Bury BL9 8AT Company number 01967512 (England)