Many first time buyers have a 10% deposit for their first home, making a 90% LTV mortgage a popular option amongst mortgage providers. Explore our guide below to find out more about how you can buy your first home, remortgage or move house with a 90% LTV mortgage.
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With a 90% LTV mortgage, you borrow 90% of the cost of the home you want to buy and put down the remaining 10% as your deposit, which will most likely either be from cash savings or home equity.
For example, if you’re buying a £400,000 property, you’d need a deposit (or equity) of £40,000 to have an LTV of 90%. The remaining £360,000 would be lent to you by the mortgage provider.
Whether you’re buying your first place, remortgaging or moving house, a 90% loan-to-value (LTV) mortgage is a pretty good place to start.
A 90% LTV mortgage is where the buyer provides a deposit of 10% of the property value and gets a mortgage loan for the remaining 90% of the value.
LTV (loan-to-value) refers to the ratio between how much loan you need to buy a property vs. how much it is worth. With a 90% LTV, the ratio between the mortgage and the deposit is 90:10.
Yes, you can. As a buyer with a 90% LTV, you’ll have access to mortgage products with more competitive interest rates (that could save you thousands of pounds in interest payments) than 95% and 100% (no deposit) mortgages.
As a general rule, the bigger the deposit, the better the rates. Lower interest rates mean a larger proportion of your repayments will go towards paying off the capital you owe rather than being swallowed up by the interest charges.
So not only will having a bigger deposit mean you need to borrow less, you will pay less interest on what you borrow, too. It’s a win-win.
If you’re moving house or remortgaging, and you have positive home equity of at least 10%, then you can get a 90% LTV mortgage.
For example, if you owe £400,000 to your mortgage provider, but your home has gone up in value to £450,000, then you have positive equity of £50,000.
You can use that equity to get a new mortgage, rather than having to save up a deposit. Or, if you do have savings, you can add those to the equation and reduce your LTV even further.
If you can reduce your LTV to 85%, 80%, or even lower, then you could be offered even more desirable interest rates by mortgage lenders.
You can find out how much you owe on your mortgage by checking your most recent statement – or ask your lender directly. To find out how much your home is worth now, get a rough estimate online or ask an estate agent for a valuation.
The good news is: you are likely to be offered lower interest rates on your borrowing if you have a 10% deposit than if you only had a 5% deposit (95% LTV) – but the trade-off is that you need to save up a larger pot of cash.
The best 90% LTV mortgage is the deal with the cheapest overall cost, rather than the lowest interest rate. Be warned that while some lenders may offer temptingly low mortgage deals, when you scratch beneath the surface you find you will need to pay legal, valuation or administration costs that can add up to thousands.
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: 4 February, 2021