90% LTV Mortgages: Everything You Should Know
Prospective homeowners generally find building a substantial deposit to be one of the most difficult hurdles to overcome when getting a mortgage. It’s understandable, it begs a great deal of time and dedication, often taking years. The good news is that, if you can only afford a certain amount and feel that the time is right, then you could step onto the property ladder by getting a 90% LTV (loan to value) mortgage. 90% LTV mortgages are where you put a deposit down for 10% of a property’s value upfront and have a lender cover the rest.
A 90% mortgage isn’t the highest loan to value ratio that’s available for a house, but it is certainly a lot to ask from a lender. They are, therefore, harder to secure than mortgages which have you pay a larger deposit. It’s for this reason that we recommend you hire an expert mortgage broker to help you throughout the whole process and navigate you towards a product that’s right for you.
We at The Mortgage Genie are proud of the fact that we’ve made a reality of many of our UK clients’ housing dreams by securing a 90% LTV mortgage for them. Give us a call at 033 33 44 33 72 today if you as well want to become one of the plenty among our success stories.
Before making a decision, it’s obviously still very important that you inform yourself on all there is to know about 90% LTV mortgages. This is why we’ve put together our guide, to lay out all the details you should be aware of, while answering any questions you might ask. We’ll go over:
- What is a 90% LTV Mortgage?
- How do 90% LTV mortgages work?
- What types of 90% LTV mortgages are available?
- Can I get a 90% LTV mortgage?
- What are the pros and cons of a 90% LTV mortgage?
- Can you get a 90% LTV buy-to-let mortgage?
- Can first-time buyers get a 90% LTV mortgage?
- Alternatives to 90% LTV mortgages
What is a 90% LTV Mortgage?
The LTV, or loan to value ratio, is a measured percentage of the total value of a property that you will be borrowing. Meaning, a 90% LTV mortgage enables you to put down a deposit of 10% and has the lender make up the remaining 90%. For instance, If you wanted to purchase a property valued at £125,000 then you would pay a deposit of £12,500. Thereafter, you would gradually pay back the £112,500 you had borrowed.
In this perspective, a 90% mortgage is a rather accessible mortgage deal and is perfect for those who can’t feasibly save up for a big deposit but want to become a homeowner. To give you an idea, it’s a general rule that lenders offer up to 4x one’s annual income. So, if you wanted that house worth £125,000 then you’d have to be earning around £28,125 per year.
How do 90% LTV mortgages work?
90% LTV mortgages are evidently a significant investment for banks and lenders to make. It’s for this reason that they consider these loans as ‘high-risk’ and consequently demand you pay relatively higher interest rates, as compared with lower loan to value mortgages. However, the fact that you’ve saved for even just a 10% deposit will signal that you have a degree of financial stability and money-handling capabilities. The implication is that your application won’t need to be backed up by a guarantor in order to be accepted, as can be the case.
Despite being high-risk, this type of mortgage isn’t extremely uncommon and so there isn’t a lot of searching involved if you employ a mortgage broker to find you a suitable lender. Once you eventually secure a mortgage deal and buy your desired property, you’ll then start to pay back what you borrowed by way of monthly instalments, including the usual added interest.
What types of 90% LTV mortgages are available?
There are a few mortgage types that you can get in the context of a 90% LTV ratio. It is common and natural if you have an existing mortgage deal which is about to end that you remortgage your current property for better rates. It is possible to apply for a 90% mortgage in this scenario if you have 10% positive equity in your house.
If you decide to remortgage then you’ll have two options to choose from, you can either go with a fixed-rate mortgage, or a variable-rate deal such as a tracker mortgage. The former is favoured when interest rates are low and you want security on how much your monthly repayments cost, the latter has its rates dictated by the Bank of England’s base rate and changes each month.
Although it may seem counterintuitive, given that 90% LTV mortgages are already high-risk enough, you can also apply for a bad credit mortgage if you have adverse credit. Of course, the chances of your application being accepted are higher if you have a healthy credit score. But, with the right direction, there are specialist lenders out there who will offer such loans depending on the severity and recency of your credit issues.
Can I get a 90% LTV mortgage?
The short answer is yes, you can get a 90% LTV mortgage, provided you have a 10% deposit for your chosen property. A number of lenders offer these deals, there are, however, a variety of other factors that will go towards determining your eligibility. Each lender has a different set of criteria which you are expected to meet, though they all aim to discern your suitability.
Lenders will evaluate you by running the typical checks through both your personal and financial profile. This assessment comprises a credit check which looks to see if you have any credit debt or have failed to meet past payday loans. Likewise, they will look through your history for if you previously encountered a court county judgement (CCJ), an IVA, or went through bankruptcy. If you have one, or multiple, of these upon your file then they will work to negatively affect your eligibility for a mortgage. Having said that, if you handled such situations more than 6 years ago then it may have no effect on your application, albeit, some lenders might still reject you.
What are the pros and cons of a 90% LTV mortgage?
All mortgages have pros and cons which you will have to weigh up, and 90% LTV mortgages are no exception to this. What mortgage route is the right one for you depends entirely on your personal and financial circumstances.
The immediate advantage here is that you’ll only need to save for a deposit of 10%, a small amount when compared against lower loan to value mortgage ratios. Conversely, since there are higher LTV mortgages available than 90% mortgages, you’ll have a wider scope of deals with better rates to choose from, relatively speaking.
Likewise, if you were to save for a bigger deposit towards a lower LTV mortgage then you’d have more choices open to you. At first, It may not be apparent that initial interest rates are a major disadvantage, but over the years it soon adds up to you having paid out thousands more than what you could have done if you’d saved for an extended period. This should be taken into account alongside the usual fees and charges that are inherent when a mortgage is finalised.
Can you get a 90% LTV buy-to-let mortgage?
Unfortunately, if you’re thinking of acquiring a property to rent out to others then a 90% mortgage isn’t the ideal way to go. Buy-to-let mortgages usually require a higher deposit than 10% of a property’s value. Lender’s will have you pay more of a substantial deposit if you’re buying for this purpose, generally totalling to 25% of a housing’s cost.
This means that you’ll have to apply for a 75% LTV mortgage. Albeit, provided that you have a stellar credit rating, as well as a lucrative and stable income, then you could secure an 80% mortgage, obviously needing a 20% deposit. Typically, this is as low as lenders will go for a buy-to-let offering.
Can first-time buyers get a 90% LTV mortgage?
Yes, first-time buyers can get a 90% LTV mortgage, in fact, they are regarded as being the best target for those who want to buy their first property. This is because, especially younger first-time buyers, are often eager to get themselves on the property ladder and don’t want to wait until they have gathered a heftier deposit. 90% mortgages offer a great balance of displaying moderate financial stability while being fairly affordable.
Notwithstanding, it’s good to bear in mind that lenders can be prone to viewing first-time buyers as potentially high-risk clients. As such, you won’t have the widest property range imaginable, and it’s important to be assured that you can afford the cost of monthly repayments. Failing to meet due payments will serve to harm your chances of being approved for another mortgage in the future.
Alternatives to 90% LTV mortgages
90% LTV mortgages aren’t a universally ‘cheap’ alternative, it’s plain that they are out of reach for some. Accordingly, there are a couple of other options to consider if you want a more easily obtainable deal. In April of 2021 it was announced that the government would be introducing a 95% mortgage guarantee scheme which has already been useful in distributing many low-deposit mortgages throughout Britain. Additionally, there are a number of Help to Buy choices for selection on today’s housing market.
It’s a comfort to know that, whatever your financial situation, there is a solution to get you onto the property ladder. You could own a home by putting down a 5% deposit by way of a 95% LTV mortgage, and in a similar vein, 100% LTV mortgages make it possible to purchase property without a deposit at all. It would be right to assume that these mortgages come with significantly higher rates, yet they may represent the most suitable plan for your circumstances.
Here at The Mortgage Genie we have a comprehensive understanding on how to get a mortgage and it’s our singular mission to help people secure loans of all types. We hope that this guide has addressed any queries and concerns that you may have had surrounding 90% LTV mortgages.
Every day we help a growing number of people to move into the home of their dreams by assisting them in finding a mortgage deal that’s right for them and walking them through each step of the journey. If you require a team of expert mortgage brokers then be sure to contact us today at 033 33 44 33 73 and we’ll get started on setting you down the path of owning your ideal property! And why not see how much you could borrow up to today by using our mortgage calculator?