- 24th February 2020
- Posted by: Mark
- Category: Mortgages
One of the bigger factors that affects the rate you get is LTV (loan to value). So what is it and how does it affect the interest rate I’m offered ?
It’s All About Risk
When a mortgage lender accesses your application, there are some factors which will affect the rate you are offered such is
Providing proof of income and required documents, such as Passport, bank statements and P60
Loan to value is all about the last one on the list, deposit.
Put simply LTV is about the loan amount compared to the valued price of the property. A simple example is if a property is valued at £100,000, you have a £20,000 deposit the LTV IS 80/20. In other words you asking the lender to provide 80% of the amount you need to buy the property.
A Bigger Deposit Usually Means a Lower rate
It’s all about risk, for many a 10% deposit is about all they can afford and that’s realistic. This increases the exposure to the lender, so a higher rate of interest will apply. The more you can put down as a deposit, they better rate you’ll get, in most cases.
Many sites show very low rates, this is looks great until you see the LTV is something like 60/40 (yes a 40% deposit). These ultra low rates are more suitable to people looking for a remortgage as they may have enough equity in the property to get these rates. For most first time buyers a 30-40% deposit is out of the question.
Look At The LTV You Can Afford
It’s always best to skip to the LTV rate that applies to you. At Glasgow Mortgage Brokers we don’t typically show rates because everyone is different. Showing the best possible rate in unrealistic. Many won’t qualify and it can leave you feeling frustrated when you don’t understand how LTV affects the rate you are offered. We simply offer the best rates based on the information you provide and the LTV based on the deposit you can afford.
It’s one thing to look out for when you see all these deals with ultra low rates – most people won’t qualify for them. Hopefully we’ve given you a quick insight into how LTV works and how it affects the interest rate you’ll be offered for your mortgage.