What does LTV stand for?
Easy – L.T.V is just the abbreviation of the term Loan To Value. I know your next question – What does Loan To Value mean? In layman’s terms it is the amount of loan you require, from a lender but as a percentage of the property value. We run through this, with an example further below.
What is a 90% LTV mortgage
A 90% LTV mortgage is a loan of 90% of the value of the property you wish to purchase. So you have seen your dream home for sale, to calculate 90% of the properties value is easy – just use this formula below:
Take the current value of the property, divide that number by 100, then times that answer by 90. Simples!
So let’s run through that with proper figures so it’s a bit more real:
The property value in this example is 245,000k, so we take 245000 and divide that by 100. The answer is: 2450
Next we times (‘x’) 2450 by 90 and that gives us 220500.
So what does that mean…?
That means, again using our example, applying for a 90% mortgage on a home worth £245,000 the lender will lend you £220,500.
OK, so where does the remaining amount come from to purchase the property?
Bear in mind, that the lender is willing to lend you 90% of the value of the home you wish to buy – the remaining 10% is required by you in the form of a deposit.
Recap – LTV stands for ‘Loan to Value’, a 90% loan to value means the lender will loan you 90% of the value of the property and YOU make up the remaining 10% with a deposit.
Will 90% LTV mortgages return?
Did you know during the summer of 2020, due to COVID-19 most lenders stopped issuing 90% LTV mortgages. So what did everyone do?
Well, they either had to carry on saving to get a larger deposit so they could apply for a different mortgage. Or they simply had to wait it out for when 90% LTV mortgages would return.
Are 90% LTV mortgages back?
Yes. Banks, building societies and other lenders have re-introduced the 90% LTV mortgage. That’s great news for people, especially if you are a first time buyer.
Is 10% a good enough deposit?
Sure it is – relax! But bear in mind, the larger deposit you have, generally the better deal you can get.
90% LTV First Time Buyer Mortgages
Lets run through some first time buyer FAQs
Firstly have you been able to save a 10% deposit? If you have, a massive well done because it’s really tough! All your hard work will be rewarded, as a 10% deposit unlocks a lot of great 90% LTV mortgages.
We are going to run through the best 90% mortgages and what a typical deal looks like. That is what it looks like in terms of, interest rates, fixed deals, monthly repayments and all that jazz!
What are the best 90% fixed rate deals available?
It’s with Nationwide. That shouldn’t come as any surprise, they are the UK’s largest mortgage lender and as such offer great mortgage deals.
It’s so easy to apply, you can apply online or on the phone for the Nationwide 90% LTV mortgage, meaning you haven’t even got to leave the couch. Of course if you want to go into one of their branches you can do. They have very knowledgeable mortgage experts you can meet and they will run through the whole process with you.
You will get a decision online very quickly, they have to run through some things on their end, like a credit check and generally assess your suitability for the mortgage but it doesn’t take long. All this is standard practise and nothing to get stressed over.
Nationwide have around a whopping six, yes six, 90% LTV mortgage products to choose from, so rest assured there is something for everyone.
90% LTV Mortgage – Costs, Repayments & Terms [Example]
Ok so let’s say you want to purchase a £200,000 property that means you’ll need a 10% deposit which is 20k.
So based on that you could get:
A 2 year fixed rate deal with a product fee of £999, which would work out to mortgage repayments of around £900 per month.
What about if you don’t want to pay a product fee?
They do offer mortgages without a product fee and the monthly mortgage repayments are around £25 pounds a month more. [In that example the mortgage ‘term’ is 25 years. The ‘term’ just refers to the agreed length of the mortgage.]
Can you get a fixed deal but for longer than 2 years?
You sure can! Again Nationwide offer the best deal here. You can get a fixed deal for 5 years with a £999 product fee with monthly repayments of only £905.
Again they offer the same thing without a £999 product fee but the monthly mortgage repayments are slightly more, at around £924 per month. [This was using the same example as above, so with a term of 25 years and again using the example of a £200,000 home with a 20k deposit.]
90% LTV Mortgage Conclusion
Firstly you’ll need a 10% deposit. The difference between a fixed deal for 2 years and a fixed deal for 5 years is roughly £5 a month more. For the security that offers over those 5 years, i.e. knowing exactly how much each month you have to pay for your mortgage, it could be a real winner.
There has been a lot of other uncertainty previously (i’m thinking Covid-19) so fixing a mortgage for 5 years could be a real security blanket.
90% LTV Mortgage Benefits
The benefits of choosing Nationwide is that all first time buyers actually get £500 cash back. This is like a moving in present from your bank. We say take that while the going’s good! Nationwide has actually been offering the cashback deal for many years so we doubt this perk will end soon, but you never know.
You can pay off your mortgage quicker by making ‘over-payments’. So this is where you pay you normal mortgage repayments each month but then you can pay extra on top of that. Only if you want to of course.
Why bother doing that?
It will help reduce your mortgage debt faster. This could save you money in the long run. There is a limit though to how much you can overpay. [After all, banks make their profits from the interest, so they will want to keep you as a customer for as long as possible.]
The limit you can therefore over pay on your mortgage with Nationwide is 10% per year. Any more than 10% and you incur ‘ERC’ charges, these are Early Repayment Charges’. This is standard though with most lenders so Nationwide is no different here.
Tips before taking out a 90% LTV mortgage
Stress Test Yourself!
This is one of the standard procedures that banks will do anyway to assess your suitability for a mortgage, so beat them too it.
One way of doing this is to imagine you have a drop in your income by 5-10% due to unforeseen circumstances. Can you still comfortably afford the mortgage repayments? If the answer is no, be sure you aren’t over stretching yourself financially. Being able to afford to repay the mortgage with a drop of 5-10% in your income is awesome, it will stand you in very good stead.
Credit score
Now there are no hard and fast rules for taking out a 90% LTV mortgage and the credit score you’ll need for that. However most people agree you should have no issues with an average/good credit score.
