75% LTV Mortgage
What is a 75% loan-to-value mortgage?
With a 75 % LTV mortgage, you can borrow up to 75% of the purchase price of the house you want to buy.
To obtain this size mortgage, you need to put down a 25% deposit if you are buying a home, or have at least 25% equity in your property if you are remortgaging or porting your mortgage.
Many banks and building societies offer mortgages of this size and if you qualify, you will benefit from deals with more favourable interest rates and reduced mortgage repayments.
Example: If you wanted to buy a house worth £200,000, you would need to pay a deposit of £50,000 as this is 75% of the property value.
What is a 75% loan to value and how does it affect my mortgage?
When you’re looking at home loans, you will notice the term ‘loan to value.’
Loan to value (or LTV) refers to the percentage of the loan you wish to borrow against the value of the property you want to purchase. Mortgage home loans are available in 5% increments, typically beginning at 60% LTV and maxing out at 95% LTV.
The best deals are given to those who can take out a mortgage with a low loan-to-value (LTV). This is because of the way mortgage providers assess risk.
Loans with high LTV ratios are considered a higher risk as lenders stand to lose money if they have to repossess the property of a customer who has defaulted on their monthly repayments.
Because high LTV loans are risky, these will often come with higher rates of interest to offset some of the risk to the lender.
If you’re able to afford the deposit for a mortgage with a lower loan-to-value, you will be considered a lower risk by the lender. Your upfront cost will be higher but the overall cost of your loan will be lower due to the better deals you will be offered.
Can I get a mortgage with a 25% deposit?
With a 25% deposit, more mortgage providers will be accessible to you and you will have a wider range of deals to choose from.
However, you will still need to pass the lender’s credit and affordability checks. If you pass these, then you may be able to get a 75% LTV mortgage.
Example: 25% deposit mortgages on a property valued at £250,000
If you qualify for a 75% loan-to-value mortgage, you will need a deposit of 25%.
For a house valued at £250,000, a 25% deposit equates to £62,500. If you are able to raise this much money, your lender may be willing to give you a mortgage loan amount of £187,500.
Best 75% LTV mortgage
As a whole of market mortgage broker, we have access to the majority of mortgage providers on the market.
Should you decide to use our services, we will compare mortgages on your behalf and advise you on the loans and lenders that are ‘best’ for your financial circumstances.
When working out which mortgage is the best, the following will be taken into consideration.
The overall cost of your mortgage will include both the capital and the interest that has been added to your loan payments.
Various factors determine the interest rate you will be offered. These include your credit record, the loan term, and the size of your deposit.
As we have established, you stand a good chance of being offered a mortgage deal with the most affordable rates of interest if you can afford a lower LTV with a 25% deposit. This is because you pose less risk to the lender.
To further improve your chances of gaining access to the lowest mortgage rates, you should…
Improve your credit rating
Lower your debt-to-income ratio
Use the services of an experienced mortgage broker such as ourselves
The interest rate on your loan will also depend on the type of mortgage you take out. You can choose between variable-rate mortgages and fixed-rate mortgages.
Variable rate mortgage
Should you opt for a lender’s standard variable-rate mortgage, you might benefit from a low rate of interest at the start of your mortgage, but depending on the lender’s discretion and factors within the economy, that interest rate could rise or fall during the initial deal period.
There are three types of variable-rate mortgages: tracker rate mortgages, discounted variable rate mortgages, and your lender’s standard variable rate (SVR) which is the rate you will move on to at the end of the deal period.
A discounted mortgage rate is a reduced version of the lender’s standard variable rate (SVR) that is set for an initial period (typically 2-5 years). It could go up or down at any time.
Tracker mortgages typically follow the Bank of England’s base rate. In the same way, a discounted mortgage rate fluctuates over time, the tracker rate could also change during the initial period of your loan.
Fixed-rate mortgages often come with a higher rate of interest. But as this will be locked in for a set period, you won’t have to worry about any sudden hikes in interest. Furthermore, the same amount of money will leave your account each month so this can help you with your budgeting.
At the end of the fixed term, you should remortgage onto a new deal to gain access to more affordable LTV mortgage rates. If you don’t make the switch, you will fall onto your lender’s standard variable rate (SVR) and the total cost of your mortgage will increase. You can remortgage earlier but you may be subjected to the early repayment charges set by your lender if you do.
Which mortgage type is right for you?
The type of mortgage you choose will affect the amount you have to pay each month. A mortgage with discounted rates or tracker rates can seem attractive when the interest rate is low but if it increases, you will have to pay more during the initial deal period.
A fixed-rate mortgage can also seem attractive if you’re able to lock yourself into a deal with affordable LTV mortgage rates. But you won’t benefit from any interest rate drops during this initial period unless you decide to remortgage early.
There are pros and cons to both types of mortgages so get in touch with our team to discuss all of your available options.
Mortgage fees add to the total cost of your mortgage loan amount. Some of these can be added to your mortgage payments so you don’t necessarily have to pay them all upfront.
The cost of mortgage fees can vary between lenders so it’s worth speaking to our team if you want to minimise these charges on your mortgage deal.
Some lenders attach incentives to their home loans, such as cashback or a free valuation. These can be attractive but while you might save money in one area, you might face higher costs elsewhere, so speak to our team before accepting any incentive from a mortgage lender.
Before they offer you a mortgage, your lender will carry out credit checks and assess your affordability.
To ensure mortgage approval, we advise you to…
Improve your credit score
Reduce your expenses
Cut down on unnecessary spending
Clear or minimise your debts
Save up for more than the minimum deposit
Compare 75% LTV (25% deposit) mortgage deals
Don’t settle for the first mortgage deal you see. Compare mortgages by opting for one of the following options.
There are over 90 different mortgage providers in the UK so contacting them all will take up a lot of your time. You might also get into a muddle if you don’t know which deals are right for your situation. As such, it’s probably wise to avoid this option unless you have the time to explore and learn more about your available options.
Mortgage comparison websites can be useful as you can get most of the information you need at the click of a button. However, some comparison websites are biased toward certain mortgage providers so this isn’t always the best option.
The team at YesCanDo Money can compare mortgage deals on your behalf. As we know what constitutes a good deal and as we aren’t biased toward any particular lender, we guarantee that we will find you the best deal for your particular situation.
Should I Get A 75% LTV Mortgage?
Is a 75% LTV mortgage right for you? Well, this depends on your financial circumstances and mortgage situation, so it’s worth speaking to our team before you make a decision. In the meantime, consider the following.
A 75% LTV mortgage can be considered by most home buyers
With a 75% LTV mortgage, you will save money in the long term due to the reduced payments on your loan. But if a 25% deposit puts you in financial jeopardy, you might want to consider an 80% or 85% LTV mortgage deal instead.
Affordability & eligibility criteria
A 75% LTV mortgage isn’t right for you if you are unlikely to pass the lender’s affordability and eligibility checks. But if you can afford the deposit, as well as the mortgage fees and ongoing payments, then you may be eligible for various 75 LTV mortgage offers.
Remember that your home may be repossessed if you don’t make your payments, so even if you do pass the lender’s checks, only pay the 25% deposit if you know it won’t hurt your finances.
A 75 LTV mortgage is usually out of the question for some first-time buyers due to the high deposit cost. However, if you can make a larger down payment, you will reduce your mortgage amount.
As we discuss here, there are different ways to raise money for a mortgage 25 % deposit, so check out our article for further guidance.
You may be eligible for a 75 LTV mortgage if you’re moving home but your application may be rejected if you don’t have at least 25% equity in your existing property.
If you are in negative equity (meaning the value of the property has gone down), you could pay a deposit to cover any shortfall.
75% LTV mortgages are available for new build properties so are worth considering if you can raise enough money for the deposit.
The maximum LTV on a standard buy-to-let mortgage is 85%, so it is possible to buy an investment property with a 75% loan-to-value mortgage, provided you meet the buy-to-let lending criteria.
If you have enough equity in your home, you should be able to remortgage onto a 75% LTV deal.
This is a good idea if you’re about to move onto your lender’s standard variable rate after the initial period of your loan. But if you’re still midway through your mortgage term, you might want to delay your remortgage so as to avoid your lender’s early repayment charges.
Frequently Asked Questions: 75% LTV Mortgages
Yes! You will benefit from smaller monthly repayments if you can put down a larger downpayment due to the lower mortgage interest rate.
But if you’re likely to experience financial difficulties after paying 25% of the value of the property, you might want to consider a higher LTV with a smaller deposit instead.
Speak to our team. We have access to the whole market, so know which banks and building societies are offering the best 75% LTV mortgages.
Any LTV under 80% is considered the best, provided you can afford the high deposit costs.
No! Your deposit will be lower but the overall cost of your mortgage will be higher due to the steeper mortgage rates affixed to your loan.
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