Understanding LTV in Mortgages: What You Need to Know

by Peter Morgan | Jul 9, 2024

Ever wondered what LTV means when it comes to mortgages? ? LTV stands for Loan-to-Value. It’s a key factor lenders use to determine the risk of a loan.

What is LTV?

Definition: LTV compares the loan amount to the value of the property.

For example, if you’re buying a house worth £200,000 with a loan of £160,000, your LTV is 80%.

Why does LTV matter?

Risk Assessment: Higher LTV means higher risk for lenders.

Interest Rates: Lower LTV can get you better rates. Higher LTV might mean higher rates.

Impact on You:

Deposit: Larger deposit payments lower your LTV.

Approval Chances: Lower LTV can improve your chances of loan approval and better terms.

Refinancing: Lower LTV can make refinancing easier and cheaper.

Example:

House Price: £250,000

Down Payment: £50,000

Loan Amount: £200,000

LTV: 80%

Understanding your LTV ratio can help you make better decisions when buying a home or refinancing. ??

Your home may be repossessed if you do not keep up repayments on your mortgage.

We offer a free initial mortgage consultation. There may be a fee for arranging your mortgage and the precise amount will depend on your circumstances. We typically charge a fee of £595.00.

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