A 95% mortgage allows you to borrow up to 95% of the value of the property you want to purchase, this high loan to value mortgage is Ideal for those looking to get on property ladder or for any homeowners with a small deposit.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
A 95% LTV mortgage is one of the highest loan-to-value ratio mortgages available, but how do they work and what should you be aware of?
The loan-to-value ratio describes how much you are borrowing in relation to the price of your house.
For example, if you borrow £90,000 for a house costing £100,000, then your loan-to-value ratio is 95,000/100,000, or 95%.
The loan-to-value ratio is a huge factor for lenders to decide how much they can lend you, and at what rate.
If you borrow more in relation to your house value then you are a higher risk for the lender, as there’s more for you to pay back.
That also means there’s more risk for you, the borrower. The more you borrow the more you have to pay back and, crucially, the more interest you will eventually pay over the lifetime of the mortgage.
Due to the risks involved for lenders, 95% LTV mortgages tend to be less available than lower ratio mortgages.
However, 95% mortgages have seen somewhat of a resurgence as the Bank of England’s interest rates remain low and the lenders can borrow for less.
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