75% LTV Mortgages: All You Need to Know
For most prospective homeowners, saving a substantial mortgage deposit is the biggest hurdle. It requires time and dedication, but if you commit to building a solid deposit, you can access some of the best mortgage deals on the market. Depending on your budget, a 75% LTV (loan-to-value) mortgage might be ideal for stepping onto the property ladder. This type of mortgage means you contribute a 25% deposit, with the lender covering the remaining 75%.
Compared to higher LTV mortgages, 75% LTV mortgages pose less risk to lenders. If you can provide a 25% deposit, finding a willing provider is usually straightforward, especially with the guidance of an expert mortgage broker who can help find the best fit for your situation.
At The Mortgage Genie, we take pride in making homeownership dreams come true by securing 75% LTV mortgages for many clients. If you’d like to be our next success story, call us at 01915809890. To further support you, we’ve created a guide covering all essential details about 75% LTV mortgages, answering any questions you may have.
- What is a 75% LTV mortgage?
- How do 75% LTV mortgages work?
- What types of mortgage rates are there for 75% LTV mortgages?
- Can I get a 75% LTV mortgage?
- What are the advantages and disadvantages of a 75% LTV mortgage?
- Can you get a 75% LTV buy-to-let mortgage?
- Can first-time buyers get a 75% LTV mortgage?
- Alternatives to 75% LTV mortgages
What is a 75% LTV mortgage?
A mortgage’s LTV, or loan-to-value ratio, represents the percentage of a property’s value that you borrow. With a 75% LTV mortgage, you borrow 75% of the home’s cost, while the remaining 25% is your deposit. If you’re remortgaging or moving, you might use your existing home equity to cover this amount.
For example, if you’re buying a £300,000 property with a 75% LTV mortgage, you’d need a £75,000 deposit and would borrow £225,000, repaid over time. Generally, lenders offer up to four times your annual income, so to afford a £300,000 home at a 75% LTV, you’d need a combined annual income of around £56,250.
How do 75% LTV mortgages work?
A key benefit of a 75% LTV mortgage is a higher likelihood of acceptance. By saving a 25% deposit, you demonstrate financial stability and good money management - qualities which lenders value. Unlike higher LTV mortgages, this option typically doesn’t require a guarantor.
Most banks offer 75% LTV deals, usually as repayment mortgages. Once approved, you’ll repay the loan in monthly instalments with interest. Compared to higher LTVs, the interest rates are generally more favourable. By the end of the term, you’ll have fully repaid the loan and own the property outright.
What types of mortgage rates are there for 75% LTV mortgages?
When choosing a 75% LTV mortgage, the interest rate is an integral factor. By securing a favourable rate, you reduce your monthly payments. The two main types of mortgage rates are fixed-rate and variable-rate.
Fixed-rate mortgages lock in an interest rate for a set term, typically two, three, five, or ten years. While initial rates may be higher, this offers stability, protecting you from future rate hikes. Fixed rates are ideal for those who prefer predictable payments.
Variable-rate mortgages have interest rates that fluctuate, meaning your payments may change each month. The rates can be influenced by factors like the Bank of England base rate or the lender’s own terms. Tracker mortgages follow the base rate changes directly, while other variable types, such as discount and capped rates, are less common.
The main advantage of a variable-rate mortgage is the potential for lower payments if rates are low, but there’s the risk of higher payments if rates increase. In contrast, fixed-rate mortgages provide more budget stability.
After the fixed term ends, you'll typically be moved to the lender's standard variable rate (SVR), which tends to be higher. Many borrowers choose to remortgage at this point. Always consider additional fees and charges when choosing a mortgage.
Can I get a 75% LTV mortgage?
If you have a 25% deposit for a property, it's highly likely that a lender will be willing to provide the remaining 75%. 75% LTV mortgages are common, but approval depends on each lender’s criteria.
Lenders look for financial stability to ensure you can comfortably make repayments. One important factor is your credit rating; any history of financial instability, such as missed payday loan payments, adverse credit, CCJs, IVAs, or bankruptcy, can impact your application and possibly lead to rejection.
However, if these issues are in the past and you’ve shown responsible financial behaviour since, they may not be a barrier. Additionally, passing an affordability check is vital. Lenders will require proof of your income and assess your regular expenses to ensure you can manage the monthly payments.
To get an idea of your current financial standing you can use our free credit check tool (£14.99 per month after the free 30-day trial). Using it will help you spot possible mistakes and fraudulent activity so that you can keep on top of any problems without delay. The trial and subscription can be cancelled at any time.
What are the advantages and disadvantages of a 75% LTV mortgage?
When choosing an LTV ratio, it’s important to consider both the advantages and disadvantages. 75% LTV mortgages strike a balance, making them a popular choice for many.
Benefits: With a 25% deposit, you’ll have access to a wider range of deals, including more manageable repayments and competitive interest rates. Lenders view 75% LTV mortgages as a moderate risk, which is beneficial compared to higher LTV options.
Drawbacks: The main drawback is the need to save for a 25% deposit, which can take years for many people. Moreover, by targeting this ratio, you may miss out on more attractive deals available for lower LTVs, such as 60%. While saving longer may offer better deals in the long run, it can delay your homeownership plans.
Can you get a 75% LTV buy-to-let mortgage?
Yes, you can get a 75% LTV buy-to-let mortgage, but it’s typically the minimum accepted by lenders. To qualify, you’ll need to provide proof of an excellent credit score and potential profitability.
With a 25% deposit, you may also face higher interest rates compared to those offering larger deposits. Buy-to-let mortgages often offer the option of an interest-only loan, a type generally available for properties purchased to rent out.
Can first-time buyers get a 75% LTV mortgage?
75% LTV mortgages are a great option for first-time buyers, as the 25% deposit is reasonable to save. While first-time buyers are often seen as higher-risk, saving a 25% deposit demonstrates financial stability, helping to offset this concern.
The more manageable interest rates available for 75% LTV mortgages also work in your favour, as they reduce the risk of missed payments, which could affect future mortgage opportunities. Though saving for a 25% deposit can be challenging, it offers significant long-term benefits.
Alternatives to 75% LTV mortgages
If a 75% LTV mortgage is beyond your budget, there are other options. The government’s 95% mortgage guarantee scheme, launched in April 2021, helps buyers secure low-deposit mortgages.
For better interest rates, consider an 85% or 90% LTV mortgage. If you're eager to buy, a 95% LTV mortgage requires only a 5% deposit. Some 100% LTV mortgages and Right to Buy options exist, though these often come with higher interest rates. The best option depends on your financial situation.
Here at The Mortgage Genie we have a comprehensive understanding on how to get a mortgage and are dedicated to helping people secure loans of all types. We hope that this guide has answered all the questions and cleared up any of the concerns you may have had surrounding 75% LTV mortgages.
Every day we help an increasing number of people find housing happiness by assisting them in getting their perfect mortgage deal and guiding them through every step of the way. If you’re in need of a team of expert mortgage brokers then feel free to call us today at 01915809890 and we’ll get you set on the journey towards owning your dream home! And why not see how much you could borrow up to today by using our mortgage calculator?
This information is a guide only and should not be relied on as a recommendation or advice that any particular mortgage is suitable for you. All mortgages are subject to the applicant(s) meeting the eligibility criteria of the specific lender. You should make an appointment to receive mortgage advice which will based on your needs and circumstances.