75% LTV Mortgages: All You Need to Know
For almost every prospective homeowner, amassing a substantial deposit is the biggest obstacle that needs to be overcome. It takes a considerable amount of time and dedication. Although, if you do commit to saving up a well-sized deposit sum then you’ll be rewarded with some of the best mortgage deals available on the housing market. And, depending on the scale of your budget, a 75% LTV (loan to value) mortgage may be your best option for getting your foot onto the property ladder. A 75% LTV mortgage is one where you put down a deposit equal to 25% of the total value of the property that you’re after, having a lender make up the remaining 75%.
Relative to higher LTV mortgages, 75% mortgages don’t demand an unreasonable amount from lenders. Meaning, if you’re in a position where you can afford to produce 25% of a property’s value, then you won’t have to search for long before you find a provider who is willing to let you borrow the other 75%. This is the case to an even greater extent when you employ an expert mortgage broker that can help you through the entire process, while also finding the product that’s right for you and your circumstances.
Here at The Mortgage Genie we’re proud to say that we have made many of our clients’ housing dreams become a reality by securing a 75% LTV mortgage for them. If you’re interested in joining the many among our success stories then can give us a call today at 01915809890.
Even given the service we can provide you with, it’s still valuable to clue yourself up on all the essential details that you should be aware of concerning 75% LTV mortgages. It’s the reason why we’ve put together our guide, to answer any and all of the questions that you may have or haven’t yet thought about. We’ll go over:
- 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?
The LTV, or loan to value ratio of a mortgage deal is a measured percentage of a property’s total value that you will be borrowing in order to purchase it. So, choosing a 75% LTV mortgage means that you borrow 75% of a house’s cost. The leftover 25% is put forward by you as a mortgage deposit. If, however, you wanted to instead remortgage or move home, then you could use your existing positive home equity to cover this remainder.
Say, for instance, you wanted to purchase a property with a total value of £300,000 by way of a 75% mortgage. In this situation, you would be required to pay a deposit of £75,000. Subsequently, you’d pay back the £225,000 that you had borrowed over time. To give you an idea of your affordability, lenders generally offer up to 4x of an individual’s or couple’s combined annual income. As a result, to acquire a property worth £300,000 with a 75% LTV ratio you would need to be comfortably earning around £56,250 a year.
How do 75% LTV mortgages work?
One of the direct benefits of applying for a 75% LTV mortgage is the fact that you’re fairly likely to be accepted for such a deal. One reason for this is simply because demonstrating your ability to save for a 25% deposit signals that you have a certain degree of financial stability alongside decent money-handling capabilities. These are two attributes that lenders significantly regard when determining your suitability as a mortgage candidate. Whereas higher LTV mortgages might require support from a guarantor, a 25% deposit mortgage will not.
What this ultimately means is that it will not be difficult to find a mortgage provider who can offer you a loan equal to 75% of a property’s value. In fact, the majority of banks supply these deals, typically as repayment mortgages. That is, after being accepted and agreeing on the terms, you’ll begin to gradually pay back what you’ve borrowed via monthly instalments. This includes the usual added interest, which is rather fair when compared with higher LTV mortgages. When the mortgage term eventually ends, you will have fully repaid your mortgage loan, and so, own the purchased property outright.
What types of mortgage rates are there for 75% LTV mortgages?
An integral part of selecting the best mortgage deal concerns the quality of the interest rates. By seeking out the most favourable interest rates that are available to you, you thereby lessen the amount you pay back each month. In the context of a 75% mortgage, there are two primary types to know of. Namely, fixed-rate and variable-rate.
Fixed-rate mortgages work by having you pay the initially agreed upon interest rate for a set period, without that figure changing. The length of the term is generally either between two, three, five, or even as long as up to ten years. It’s often the case that fixed rates start off as being relatively higher than their counterparts. This, however, is balanced out by the fact that you have a particular level of certainty and security regarding the cost of your monthly contributions. The benefit here is that you will be exempt from any future interest rate rises, a good choice for those who keep to a steady budget.
The other option is to go with a variable-rate mortgage. If you’re on a variable-rate deal then the interest rates that your repayments are subject to will fluctuate. That is, they can likewise increase or decrease from month to month. It is up to your lender’s discretion as to in what manner the rates vary, and they don’t have to necessarily follow suit with a financial indicator like the Bank of England base rate. One such mortgage type that does adhere to the latter, however, is a tracker mortgage. With tracker mortgages, if the Bank of England’s base rate increases or decreases, so too do your interest rates. Other, less common types, include discount and capped rates, these are both fewer in number.
The advantage that variable-rate mortgages have over fixed-rate ones is evident, that is, if rates are low then you will benefit from less expensive monthly repayments. Although, by the same token, you risk paying relatively more per month if there is a spike. And, moreover, you also lose the financial certainty that comes with a fixed-rate, consequently making it potentially harder to stick to a budget.
Whatever your type of mortgage rate, when the set term ends, you’ll be placed onto your lender’s standard variable rate (SVR). SVR’s tend to be quite costly, and so most people decide to remortgage for better deals at this stage. When considering, it’s also important to factor in the additional fees and charges that come with securing a mortgage.
Can I get a 75% LTV mortgage?
If you have a 25% deposit set aside for a property you’re targeting then it’s highly probable that you can find a lender willing to make up the remaining 75%. 75% LTV mortgages are, in fact, quite a common choice among prospective homeowners. Of course, there is no guarantee, as each provider has their own set of lending criteria which they will weigh your suitability up against.
Lenders look for financial security in their applicants, so that they can be assured you’ll be able to comfortably make your monthly repayments. One universal element that lenders factor into their assessment of you is the quality of your credit rating. Correspondingly, any part of your past that may denote financial instability will negatively affect the strength of your mortgage application.
This includes whether you have ever failed to meet payday loans or had adverse credit, for example. Similarly, your ever having a court county judgement (CCJ), an IVA, or filing for bankruptcy before will also be things which determine your eligibility. Such recorded instances can be detrimental to the outcome of your assessment and cause lenders to reject you. Yet still, if you handled them a while ago and have shown positive behaviour since, then they may not carry any consequent influence over your suitability. Furthermore, passing an affordability check is essential, and lenders will want proof of your income, as well as the ability to inspect your regular outgoings.
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 deciding what LTV ratio mortgage is right for you, there are a set of advantages and disadvantages to be weighed up by you for each, 75% LTV mortgages are no exception to the rule. The apt route for you to take depends entirely on your personal and financial circumstances.
75% LTV mortgages offer a balanced approach to the mortgage process, hence why they are one of the more common options. That is, saving for a 25% deposit means you’ll have access to a wider range of deals, and those with more manageable monthly repayments and competitive interest rates, as compared to higher LTV mortgages. This is because such mortgages are viewed by lenders as posing a moderate amount of risk. I.e., not having an extremely low, nor a particularly high possibility of defaulting.
The negatives of going with a 75% LTV mortgage comprise firstly, the need of having to save up for a 25% deposit. This is a disadvantage because, for the majority of people, it implies years of saving and scrupulous accounting. This isn’t an ideal option for those who are firm in their eagerness to have a property that they own. And secondly, if you were to set this margin as your deposit goal then you could be missing out on some of the even more lucrative deals that are out there, such as those reserved for 60% LTV mortgages. The longer you save, the bigger the long-term monetary benefits.
Can you get a 75% LTV buy-to-let mortgage?
Yes, you can get a 75% LTV buy-to-let mortgage. Albeit, it’s important to keep in mind that a 75% loan to value ratio for a buy-to-let mortgage is the bare minimum that is generally accepted by lenders. Meaning, you will have to provide evidence of an excellent credit score and potential profitability. Followingly, you will be offered relatively poorer rates than if you were to produce a larger deposit sum. Buy-to-let mortgages, however, open the opportunity for an interest-only mortgage, a mortgage type almost exclusively offered to those purchasing property for the purpose of renting it out to tenants.
Can first-time buyers get a 75% LTV mortgage?
75% LTV mortgages are an ideal choice for first-time buyers. This is because the deposit required is a reasonable amount to save up. Moreover, lenders are inclined to consider first-time buyers as being ‘high-risk’ candidates, making their scrutinies of your financial and personal profile more stringent. And so, as previously said, since being able to accumulate a 25% deposit demonstrates a moderate level of financial trustworthiness, it therefore works to cancel out this prejudice.
The more manageable interest rates that are available for 75% mortgages are additionally beneficial here, given that failure to keep up with monthly mortgage repayments serves to harm one’s chances of future mortgage approval. It’s not easy to save such an amount, especially for those who are younger, but it pays significantly in the long-run to be financially shrewd.
Alternatives to 75% LTV mortgages
If you’ve concluded that a 75% LTV mortgage is out of your price range then don’t worry, there are plenty of other mortgage choices on the market today. It was just in April of 2021 that the government announced their 95% mortgage guarantee scheme, a scheme that has already corroborated itself as being an effective way of helping people to get a position on the property ladder by securing a low-deposit mortgage. Likewise, there are a vast array of Help to Buy options out there.
For those who still want relatively better interest rates, a slightly more lenient route would be to opt for either an 85% LTV mortgage or a 90% LTV mortgage. And, on the other hand, if you simply can’t wait to have a property of your own, then a 95% LTV mortgage will get you a new house with a deposit as little as 5%. There are even 100% LTV mortgages circulating on the market. Naturally, these deals come with substantially higher interest rates. But, what’s correct for you is determined by your specific 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?