An 85% loan-to-value (LTV) mortgage means your total borrowing is 85% of the property's value. The remaining 15% is the deposit you put forward.
An 85% LTV mortgage is considered one of the higher loan-to-value ratio mortgages, so you will normally pay a higher interest rate on your borrowing than someone who puts down a 25% or more as a deposit.
This because the more you put down as a deposit the less risky a lender will consider you to be.
An 85% LTV mortgage is a loan worth 85% of a property’s price, so you, the borrower, will be putting in 15% deposit of your own money. This is also known as the equity share.
With an 85% mortgage, you borrow 85% of the property value from a mortgage lender and the remaining 15% comes from your deposit.
Say you want to buy a property worth £150,000, then to borrow 85% LTV you would need to be able to put down a deposit of £22,500, so you would borrow the remaining 85%, or £127,500.
The table shows how much deposit you'd need for an 80% mortgage for different property values. This might help you decide if a 15% deposit is within your reach.
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The deposit amount is obviously a key element of the lending criteria – you'll need a 15% deposit in order to be eligible for an 85% mortgage, and you'll normally need to prove it's from an approved source.
However, lenders have other criteria when determining whether to lend to you, including:
Income – you can normally borrow around four-and-a-half times your annual income
Your outgoings – the lender wants to know you can afford the repayments based on your current spending habits
Credit history - the lender wants to know you are reliable at managing debt and will look at your credit history to determine this
You'll also need to be within the minimum and maximum age restrictions and lenders may have other criteria that you need to meet also.
A mortgage broker can help advise you on the lending criteria to help make sure you only apply for mortgages suited to you.
What you can afford is largely determined by what you can put forward as a deposit and what you can afford to pay back each month, but not exclusively.
When taking out a mortgage you should always leave some money aside to account for additional costs.
For instance, if your property is over the Stamp Duty threshold you will have to pay stamp duty. This is a tax that is charged as a percentage of the property’s purchase price.
You will also have solicitor and mortgage arrangement fees to consider, as well any potential repairs you may have to undertake.
When buying a house you have to factor in unexpected costs. It’s also a good idea to have three to six months' worth of household bills and expenses (including your mortgage payments) in an accessible savings account.
During the Covid-19 pandemic, aspiring home buyers often had to have at least a 15% deposit saved, as there were no 95% deals and very few 90% deals available. While there are now many more 90 and 95% mortgage deals available, if you're able to save up a bit more and get an 85% LTV mortgage, you'll generally be offered better deals and rates. ”Claire Flynn, Senior Content Editor - Mortgages
No, you can't normally get an 85% LTV buy to let mortgage with a 15% deposit. Most buy to let lenders require a minimum deposit of at least 20 to 25% and some possibly even more.
However, some buy to let mortgage lenders do have specialised mortgage deals for portfolio landlords who may have several properties. It's worth speaking to a mortgage broker to discuss your buy-to-let mortgage options.
Unsure whether you can afford a 15% deposit, or want to see if a lower LTV product might suit you better? Find out about our best mortgage rates and deals or compare different LTV products by clicking the links below.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
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