Deborah Ward, Branch Manager at our Biddulph branch explains:
Loan to value or LTV is all about the value of your mortgage in relation to how much your property is worth. It’s normally a percentage figure that reflects the percentage of your property that is mortgaged, and the amount that is yours (the amount you own is usually called your equity).
For example, if you have a mortgage of £150,000 on a house that’s worth £200,000, you have a loan-to-value of 75% – therefore you have £50,000 as equity.
LTV is particularly important for first time buyers looking to take their first steps on the property ladder. As a first time buyer you may not have a lot of money to put down as a deposit, meaning the loan-to-value you need may be quite high.
Mortgages are categorised according to their loan-to-value LTV. So if you have a 5% deposit, you will need a 95% LTV mortgage.
Building Societies and banks tend to have bands where mortgage rates become cheaper. They get cheaper the larger the deposit because the more equity you have, the lower risk you are to them if your house loses its value. Loan-to-value becomes a key consideration when you come to buy or sell your property, remortgage or release equity.
Generally speaking, the golden rule with mortgages is to save as much deposit as possible. Though not always the case, the larger your deposit, the cheaper your mortgage rate will be.
Here at The Hanley, we have a range of mortgage products available with different LTVs. Take a look at our current mortgage deals here, or give us a call on 01782 255000 to see how we can help you.