Firstly, what does 'Loan to Value' mean?
Loan to value (also referred to as LTV) is the percentage of borrowing you take out against your home. For example, if you have a £90,000 mortgage on a £100,000 property, the loan to value ratio would be 90%.
How do we work that out? 👇
Your loan to value ratio, is the ratio of what you borrow as a mortgage, vs how much you pay as a deposit. So, you pay a deposit of £10,000 for a property worth £100,000 👉 meaning your deposit covers 10% of the property price. You get a mortgage of £90,000 to pay for the rest 👉 meaning your LTV is 90%
Why is it important to know your LTV?
Lenders always look at your LTV when deciding whether or not to accept your mortgage application. Naturally, the lower your LTV, the better it is for them, and therefore the more likely they are to lend to you. The quickest way to improve your LTV is to increase your deposit size - however we appreciate this is easier said than done! It's also important to remember that your LTV will come up whenever you remortgage too.
Improving your Loan to Value ratio
The aim of the game is to try to increase the amount of equity in your home so you don’t need to borrow as much.
You can do this by:
- Saving more towards your deposit
- Pushing for a lower price on a new home than the seller is asking
- Adding value to your current home by making home improvements
The content on this page is a guide and for reference only. It does not constitute financial advice. If you would like to speak with one of our qualified mortgage advisors at #go2mortgages about your specific situation, please reach out using the contact details below. We would love to help you purchase a first home, help with a remortgage or set up/review your protection policies.
📲 07917 681513
📲 07879 474281