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A 90% loan-to-value (LTV) mortgage is any home loan where you borrow 90% of the property's value from a lender. The remaining 10% is the deposit you need to provide to secure the mortgage.
The 90% that you borrow is the LTV ratio. The higher the ratio between what you borrow and the value of the home, the greater the risk for any lender.
This means that if you opt for a lower LTV mortgage, such as a 90% mortgage, you'll generally pay higher interest rates compared to lower LTV mortgages.
If you want to apply for a 90% mortgage, you'll need to come up with a deposit worth 10% of the property's value. The lender will loan you the remaining 90%, and you'll repay this over the full term of the mortgage, along with interest payments.
For example: If you want to get a 90% mortgage for a property costing £150,000, you would need to put down a deposit of £15,000
The lender would then lend you £135,000, so long as you meet their criteria
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|2-year fixed (initial rate)||5-year fixed (initial rate)|
|Halifax - 4.84%||Halifax - 4.43%|
|Melton Building Society - 4.85%||NatWest - 4.49%|
|NatWest - 4.86%||Santander UK Plc - 4.51%|
|Furness BS - 4.88%||Halifax - 4.54%|
In many cases, yes first-time buyers can get 90% mortgages, provided they meet the necessary criteria, including credit history and affordability.
You'll need to save a minimum of 10% deposit to apply for a 90% LTV mortgage, but remember that your affordability will determine how much you can borrow.
Most buy-to-let mortgage lenders will insist on a minimum 25% deposit, which means you can usually only get a maximum of 75% LTV for a buy-to-let purchase. Although the deposit requirement can vary from 20-40%.
You're, therefore, unlikely to find a 90% buy-to-let mortgage. If you're a portfolio landlord, however, it may also be worth speaking to a mortgage broker about your options, as certain lenders have specialist deals for portfolio landlords.
90% LTV mortgage rates are more expensive than lower LTV mortgages. Over the lifetime of the mortgage it’s likely to add thousands of pounds extra to your mortgage versus a higher deposit.
A larger deposit will mean lower interest rates, and could save thousands of pounds over the mortgage term. However, before focusing all of your savings on a larger deposit, it's important to be aware of the other costs involved in buying a property:
The typical costs of buying a property: including stamp duty, solicitor’s fees and mortgage arrangement fees
Home ownership costs: such as unexpected repairs. Always keep some savings aside as an emergency fund
Living expenses - It's wise to keep three to six months’ worth of everyday household bills and mortgage payments in an emergency savings account in case of a sudden change in circumstances
You can find 90% remortgage deals, which means that you could remortgage when you have 10% equity in your property.
Most people find that it's much easier to meet the LTV requirements when remortgaging - as you use the equity instead of a cash deposit to secure your borrowing. Some lenders may allow you to use a mixture of both.
As with any mortgage, however, the rates available for remortgage at 90% LTV remortgage rates will be higher than if you had more equity and a lower LTV.
In some circumstances it may be better to wait until the equity in your home has increased, especially if a rise in property value is expected. A mortgage broker can advise you about whether now is the best time for you to consider remortgaging.
Equity is the part of your home that you own, so your deposit plus any repayments you've made. It will also increase and decrease with your property value
One advantage of a 90% LTV mortgage is that you will only need to provide a 10% deposit, which can help buyers to get on the property ladder sooner.
The interest rates available are also likely to be lower than 95% LTV mortgage rates, although if you can save an even bigger deposit, you may be able to access even better rates. The best 90% LTV mortgages, however, are typically available to those with a strong credit history.
90% LTV mortgage rates are cheaper than 95% LTV rates
It means you can get on the property ladder rather than spend years having to save up more of a deposit
Once you’ve paid off some of your mortgage you may be able to remortgage to a cheaper rate
The downside of a 90% mortgage is that the criteria you have to meet in order to secure a mortgage are likely to be stricter than if you were applying for a lower LTV ratio.
Lenders are very wary about the risk of negative equity and when you take out a 90% LTV mortgage, a 10% drop in house value could result in the property being worth less than the loan value.
You will pay a higher interest rate than if you put down a 15% or 20% deposit
Over the full term of the mortgage you’ll end up paying thousands more in interest compared to a lower LTV deal
The value of your property only has to fall by 10% for it to be in negative equity
If a 90% mortgage isn't right for you, find out how to compare our best mortgage rates or use the links below to learn about other mortgage LTV ratios.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
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