80% LTV Mortgages
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When you are on the lookout to buy a new property, understanding your mortgage options is crucial. As an expert in the UK mortgage market, I am here to guide you through the specifics of securing the best 80% LTV mortgages. From defining what an 80% LTV mortgage is to exploring the various rates offered by lenders, this extensive guide will help you find the best deal suitable for your financial circumstances.
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Written by:
Alison Gibson
Ascot Mortgage Expert
Last Updated:
04.11.2024
Written by:
Alison Gibson
Ascot Mortgage Expert
Last Updated:
04.11.2024
What is an 80% LTV Mortgage?
Before we delve deeper, it is pivotal to understand what a 80% mortgage entails. LTV, or Loan-to-Value, is a financial term used to express the ratio of a loan to the value of an asset purchased.
In the context of 80% LTV mortgages, it translates to the fact that you borrow 80% of the property’s total value, while the remaining 20% comes from your own money as a deposit. Therefore, with a 20% deposit mortgage, you’re essentially securing a loan that covers the substantial majority of your home’s cost, facilitating a somewhat lighter financial burden when you’re preparing to buy a home.
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How do 80% LTV Mortgages Work?
Securing an 80% LTV mortgage can seem like a daunting task, but breaking it down into simpler terms can offer a clearer perspective. Let’s delve into the mechanics of how it works:
- Deposit: You will start by saving a 20% deposit of the property’s total value. This upfront payment is your stake in your home.
- Application: Once your deposit is ready, you proceed to apply with a lender who offers the best 80 LTV mortgages. The application process will involve a series of financial assessments to determine your repayment capacity.
- Interest Rates: Lenders offer different interest rates based on the LTV ratio. Generally, 80% LTV mortgages come with relatively favourable rates since the lender perceives a lower risk compared to higher LTV mortgages.
- Repayment: Once approved, you will be entering a repayment schedule where you will pay a monthly amount inclusive of the interest and a portion of the loan principal.
- Property Purchase: With the mortgage approved, you can proceed to buy your desired property.
Why Get an 80% LTV Mortgage?
Choosing to go with an 80% LTV mortgage comes with its own set of advantages. It is a popular choice and here are the reasons why:
- Better Interest Rates: Generally, a lower LTV translates to lower interest rates as it reduces the lender’s risk.
- More Affordable Home: With 80% financial assistance from your lender, you can afford to buy a home that might have been out of your reach otherwise.
- Easier Approval: Lenders are more willing to offer 80% LTV mortgages since it involves a lower risk compared to mortgages with a higher LTV.
What Types of 80% LTV Mortgage Rates Could I Get?
The rate at which you borrow can significantly affect how much you end up paying in the long run. It’s essential to know the different rates available in the market to land the best deal. Here are the primary types of 80% LTV mortgage rates you might encounter:
- Fixed Rate: This type of rate implies that your repayments will remain the same throughout the fixed-rate term, offering stability in your financial planning.
- Variable Rate: This type encompasses several different mortgage deals, including standard variable rates where the rate can fluctuate based on the lender’s discretion.
- Tracker Rate: Under this rate, your interest rate will track a nominated interest rate (usually the Bank of England base rate) plus a set margin.
- Discounted Rate: Here, the interest rate is set at a discount below the lender’s standard variable rate for a set period.
Understanding the nuances of each rate type can aid in choosing the best 80 LTV mortgages that align with your financial planning.
Advantages of 80% LTV Mortgages
Securing an 80% mortgage comes with several benefits. Here, we highlight the advantages you stand to enjoy:
- Competitive Interest Rates: Often, these mortgages come with more competitive interest rates compared to higher LTV mortgages.
- Access to Better Deals: With a substantial deposit, you unlock the doorway to some of the best mortgage deals in the market.
- Flexible Repayment Terms: Many lenders offer flexible repayment options, making it easier to find a mortgage that suits your financial situation.
- Home Ownership Sooner: By borrowing a larger sum, you may be able to become a property owner sooner than if you were to save for a larger deposit.
Alison Gibson
Ascot Mortgage Expert
Remortgage
Remortgaging is applied when you keep
living in your present property while applying for another mortgage deal with a new lender. Before finding out how to remortgage and get the best offers from experts like Ascot Mortgages, you have to check meeting what parameters of the deal that can help you succeed the most. The range of background factors varies a lot — from the recently changed loan-to-value ratio or your existing agreement coming to an end.
Whether you are trying to get a more beneficial deal or searching for funding to improve your home conditions, remortgaging is one of the most advantageous scenarios to consider.
Disadvantages of 80% LTV Mortgages
Despite the many benefits, it is also crucial to be aware of the potential downsides to an 80% LTV mortgage:
- Higher Monthly Repayments: Since you’re borrowing a large sum of money, your monthly repayments will naturally be higher compared to having a smaller loan.
- Risk of Negative Equity: In a fluctuating property market, there is a risk that your property value could fall, leaving you in negative equity.
- Stricter Lending Criteria: Lenders might impose stringent lending criteria, making it slightly challenging to secure the loan.
- Potential for Higher Fees: Sometimes, 80% LTV mortgages might come with higher fees compared to other mortgage types.
In conclusion, 80% LTV mortgages offer a viable route to home ownership, balancing reasonable deposit requirements with competitive interest rates. As you navigate the mortgage landscape, remember to leverage expert advice to find the best mortgage deal that suits your needs perfectly. Always consider your repayment capacity to ensure that your dream home brings joy and not financial strain. With the right guidance and preparation, securing the best 80 LTV mortgages can be a smooth and rewarding journey to property ownership.
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FAQ
While an 80% LTV mortgage offers a good balance between the deposit and loan amount, qualification isn’t solely based on the ability to provide a 20% deposit.
Lenders will consider:
– Affordability: Your income, outgoings, and other financial commitments.
– Credit History: A clean credit record can enhance approval chances.
– Stability: Employment status and history.
– Property Type: Some properties might have specific requirements.
Each lender has its criteria, so it’s always best to consult with a mortgage advisor to discuss your personal circumstances.
An 80% LTV mortgage means you’re borrowing 80% of the property’s value, with a 20% deposit upfront. Generally, a higher LTV, like 80%, may have slightly higher interest rates compared to lower LTVs. As a result:
– Interest Rates: You might face a slightly higher interest rate than if you had a lower LTV, increasing monthly payments.
– Loan Amount: As you’re borrowing a considerable portion of the property’s value, the loan amount is higher, potentially leading to higher monthly repayments.
However, various factors influence mortgage rates, so it’s vital to shop around or consult an advisor for the best deal.
Yes, your credit score plays a significant role in mortgage eligibility. Lenders use it as an indicator of how reliably you’ve managed past credit. A good credit score can enhance your chances of getting a competitive interest rate and approval for an 80% LTV mortgage. If there are issues on your credit report, it’s not impossible to get a mortgage, but you may face higher interest rates or stricter terms.
Yes, being self-employed doesn’t automatically exclude you from obtaining an 80% LTV mortgage. However, lenders will typically require:
– Proof of Income: Usually in the form of the last two or three years’ worth of accounts or tax returns.
– Stability: Evidence that your self-employment is stable and has a consistent or growing income.
– Accountant’s Statement: Some lenders may request a statement from a certified or chartered accountant.
The criteria can be stricter for self-employed applicants, but with the right documentation and advice from a mortgage advisor, securing an 80% LTV mortgage is achievable.
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Ascot Mortgages authorised and regulated by the Financial Conduct Authority and can be found on the FCA register (www.fca.org.uk) under reference 776062. The FCA do not regulate some forms of mortgages. The guidance and advice contained in this website is subject to UK regulatory regime and is therefore restricted to consumers based in the UK. There may be a fee for mortgage advice. The precise amount will depend upon your circumstances but we estimate it will be £599 per mortgage account. Ascot Mortgages Ltd give you the option to pay a non-refundable fee of £1299 payable with the application. If this option is taken, Ascot Mortgages Ltd will refund any procuration fee received by the lender.
Ascot Mortgages Limited is registered in England and Wales and have their registered office at 8 Webster Court, Westbrook, Warrington, WA5 8WD. The company’s registration number is 06764971.
We are a credit broker, not a lender. We work with the whole of the lending market. We may receive commissions that will vary depending on the lender, product, or other permissible factors. The nature any commissions model will be confirmed to you before you proceed.
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