If you have a substantial deposit of 40% of the property value, you will be able to access loan-to-value (LTV) mortgages of 60%, offering you competitive interest rates. Explore this guide to learn more and compare our best 60% LTV mortgage deals.
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The cheapest and best mortgage you can get is a 60% LTV (loan to value) mortgage.
If you are financially savvy and fortunate enough to be able to put down a deposit of 40%, mortgage lenders will view you as a very safe bet – which means you’ll often be offered the lowest interest rates and promotional periods available.
For example, if you wanted to buy a property valued at £300,000, you'd need a deposit of £120,000 to qualify for a 60% LTV mortgage.
Of course, you’d be unlikely to find many first-time buyers who qualify for a 60% LTV mortgage. This type of deal is usually offered to homeowners moving house or remortgaging, who have built up a large amount of home equity in their current property.
Home equity is the difference between how much your property is worth, compared to the borrowing you have against it.
For example, if your home is valued at £400,000 and you owe £240,000 on your mortgage, then you have £160,000 in home equity.
Home equity can be built up over many years of home ownership. Those monthly payments on a repayment mortgage chip away at that loan, and as we reduce our borrowing, we build up our home equity (assuming the property does not fall substantially in value).
However, home equity can also increase if a property rises in value.
If you have a large amount of equity in your home or a significant chunk of money in savings, you may be able to qualify for a 60% LTV mortgage.
If your house price has increased significantly too, you may be able to get a 60% LTV mortgage. Over the past 20 years, UK house prices have exploded – which means a lot of people now have a relatively small mortgage for a very valuable home.
If you have a mortgage of £150,000 and the value of your home has increased to £250,000, you would have an equity of £100,000 or 40% – enough to secure a 60% LTV deal with those temptingly low interest rates.
If you do qualify for a 60% LTV mortgage, start by comparing 60% LTV mortgage rates. You might want to consider talking to a mortgage broker as they may have access to cheaper deals.
When you consider this is a loan that you may have for 25 years or more, even a tiny reduction in interest rate can shave thousands of pounds off the total interest paid over the duration of the loan.
However, while 60% LTV mortgage rates can be tantalisingly low, some lenders stipulate that you’ll need to pay legal, valuation or administration fees on top, that can add up to thousands of pounds in extra costs.
Always find out what fees you will be charged in advance. Use the Annual Percentage Rate of Charge (APRC) to compare products as this incorporates some mortgage-related fees in its calculation.
If the best deal for you does involve fees, lenders will typically add this cost to the mortgage – meaning you could be paying interest on this money for the duration of your home loan. If you can afford to, consider asking your lender if you can pay this upfront.
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Last updated: 17 November, 2021