80% LTV Mortgage
In this guide
What is an 80% loan-to-value mortgage?
An 80% LTV mortgage is a type of mortgage that requires a home buyer to have 20% deposit for a loan or a remortgager to have 20% equity in their property. Many lenders offer 80% LTV mortgages and because of the bigger deposit size, they tend to offer their customers mortgage deals with a lower interest rate.
What is an 80% loan to value and how does it affect my mortgage?
When you’re looking for a mortgage, you may notice the term ‘loan to value.’ This refers to the percentage of the loan you wish to borrow versus the value of the property you want to buy. Loan-to-value mortgages are available in 5% increments and typically begin at 60% loan-to-value upwards to 95% LTV.
The most attractive deals are given to customers who take out a low loan-to-value mortgage. As these deals come with higher deposits, mortgage providers have an assurance that they will lose less money if the customer defaults on their mortgage monthly repayments. This is why they are prepared to offer mortgages with more competitive interest rates.
An 80 LTV mortgage will guarantee you a better deal than an 85, 90 or 95% LTV deal as your deposit size will be 20% rather than 15, 10 or 5%. As the lower LTV equates to less risk for the lender, you will pay less interest than somebody on a higher loan-to-value mortgage.
Can I get a mortgage with a 20% deposit?
You may be eligible for a mortgage with a 20% deposit if you can raise the funds before you make your mortgage application. But before you are given mortgage approval, the lender will want to make sure that you meet the rest of their criteria. Such things as your credit history, age, income, and employment status will be taken into consideration when they are deciding on your eligibility for a mortgage.
If you do meet the lender’s criteria, then great! However, you must make sure you can afford such a deal before you take out a mortgage with a 20% deposit. If the high deposit size means you will run into financial difficulty, you might want to consider a higher loan-to-value deal that requires a lower deposit.
Example: 20% deposit mortgages on a property valued at £250,000
If you qualify for an 80 LTV mortgage, you would need to pay a 20% deposit. Based on a property valued at £250,000, you would need to pay a deposit of £50,000 as that is 20% of the property price. You would then borrow the remainder which in this case would be £200,000 from the lender.
If a deposit of £50,000 is too much for you, you may need to consider a mortgage with a higher loan-to-value or a less expensive property.
Best 80% LTV mortgage
As a whole of market mortgage broker, we have access to thousands of deals on the mortgage market. These include the 80% LTV mortgages that are currently available. To get the best mortgage deal, get in touch with our team. We will search the market on your behalf and will let you know which deals are the most suitable for your financial needs.
When working out which mortgage is the ‘best’ for you, the following should be taken into consideration.
The overall cost of a mortgage includes interest as well as capital. The interest rate on your mortgage will be dependent on a number of factors, such as your credit record and how much deposit you are willing to pay. The type of mortgage you choose can also affect the interest rates on your mortgage. You can choose between a fixed-rate mortgage or a variable-rate mortgage.
Fixed-rate repayment mortgage
Fixed-rate mortgages sometimes come with a higher rate of interest rate than variable mortgages but you can have the peace of mind that your mortgage rate won’t increase over time.
Your lender will offer you a fixed-rate mortgage at an introductory rate. This interest rate will usually be in place for between 2-5 years, after which time you may be able to move onto a mortgage with a cheaper fixed rate.
If you don’t switch to a new mortgage after your fixed rate offer has ended, you will move onto the lender’s standard variable rate (SVR). This will affect the overall cost of your mortgage as SVRs are typically higher than fixed mortgage rates so it’s wise to remortgage before the lender’s standard variable rate kicks in.
Variable-rate Repayment mortgage
You might benefit from lower interest rates on a variable-rate mortgage, at least for the initial period. But as the interest rates on variable mortgages rise and fall over time, depending on the discretion of individual lenders and factors within the economy, your monthly payments could increase. If this alarms you, a fixed mortgage rate could be more suitable.
If you do decide on a lender’s standard variable rate mortgage, you can opt for discounted mortgage rates or tracker mortgage rates.
A discounted mortgage rate is a reduced version of the lender’s standard variable rate and it is usually available as an introductory offer that will expire over time.
A tracker rate follows the Bank of England base rate. If the base rate goes down, you can benefit from smaller monthly repayments. But if it goes up, your mortgage repayments will be higher.
Another thing to consider when looking for an affordable mortgage is the product fees that you will need to pay. As these will affect the overall cost of your mortgage, you need to factor them in when deciding which mortgage type is right for your financial situation
Mortgage fees are sometimes offset by the incentives that some lenders offer. So, while you may need to pay more upfront, you may be eligible for an incentive that makes you financially better off in the long run.
Mortgage fees are the extra costs you need to budget for when taking out a mortgage. Some of them can be added to the total cost of your mortgage payments so you don’t necessarily have to pay for them all upfront.
Mortgage fees include the application fee, booking fee, and valuation fee. We will explain these to you if you decide to arrange a mortgage using our services.
Cashback and incentives
As the mortgage industry is very competitive, lenders will try to entice you with various incentives. Such incentives can include lower mortgage rates, free valuations, and free legal work. You might also be offered cashback where you will get a lump sum of money at the end of your deal period.
While these incentives can be very attractive, you do need to be cautious. While you might save money in one area, you could pay more elsewhere, so it’s wise to speak to a mortgage broker for advice before accepting any deals.
When you apply for a mortgage, the deals you will be offered (and your chances of mortgage approval) will depend on the lender’s affordability checks. Your income and expenditure will come under scrutiny as will your credit file.
Lenders carry out these checks because they want to make sure there is no risk in lending to you. If they suspect you won’t be able to pay your mortgage repayments, they might turn down your application or limit the mortgage deals they are willing to offer you.
To gain access to the best mortgage deals, you should find ways to improve your mortgage affordability. You can do this by…
Taking steps to improve your credit score
Finding ways to reduce your common expenses
Cutting down unnecessary spending before you make your application
Clearing or minimising your outstanding debts
Saving up for a larger deposit
Compare 80% LTV (20% deposit) mortgage deals
There are over 90 different banks and building societies in the UK and there are over 14,000 different loan-to-value LTV deals between them. Before you settle on any deal, you should compare the deals that are available. You can do this in the following ways.
To find out which deals are on offer, you could contact each bank or building society in turn. However, this is by far the worst option, as not only will it take up a lot of your time but you might start to get confused about your options if you don’t know what constitutes a good deal.
This is an easier way to compare mortgages as you will be presented with a list of mortgage deals after entering your details on the comparison website. However, some mortgage comparison websites are biased as some mortgage lenders pay them to list their products higher on comparison searches. As such, they can’t be considered reliable when looking for the best 80 LTV deal.
This is by far the best option, especially if you choose a whole of market mortgage broker such as ourselves, as we have access to nearly every lender on the mortgage market. As our only bias is towards getting you a great deal, you can be guaranteed an honest and reliable service if you choose the support of our mortgage team.
Should I Get An 80% LTV Mortgage?
Is an 80% LTV mortgage right for you? Quite possibly but it depends on your personal circumstances and your reasons for getting a mortgage. We can discuss all of your mortgage options with you but keep reading to learn more.
An 80% LTV mortgage can be considered by most home buyers
If you’re able to save up the 80% deposit, this type of mortgage can definitely be considered as you will benefit from reduced interest rates. But if an 80% deposit puts you in financial difficulty, it’s might be worth considering an 85% LTV or 90% LTV mortgage instead.
As we mentioned earlier, you need to pass the lender’s affordability and eligibility criteria before you are offered a loan-to-value (LTV) 80 mortgage.
But even if you do pass their checks, you need to consider your financial position. If it is likely to change for the worse, perhaps because of a job change or a new addition to your family, you need to consider whether an 80% LTV mortgage is affordable for you. You are at greater risk of losing your home if you default on your payments, so talk to a member of our team about the types of mortgages that are right for your circumstances.
The bigger the deposit the lower the monthly payment
80% LTV deals are available to first-time buyers from most UK lenders so if you can afford the minimum deposit required, you will benefit from lower monthly repayments over the mortgage term.
If you don’t think you will be able to afford the repayments on an 80% deal, you could either consider a higher loan to value (LTV) deal, even though this will increase the overall total cost of your mortgage amount, or you could consider a guarantor mortgage.
What’s a guarantor mortgage?
If you think you might struggle with the repayments on an 80% LTV mortgage, you could ask a guarantor to put their name on your mortgage. A guarantor is usually a family member (but not always) who is willing to repay your agreed payments if you get into financial difficulty.
You may be eligible for an 80% LTV mortgage if you own your own home and want to move into a new one.
Equity vs Deposit
The equity in your home will need to be at least 20% of the property value of your new home. If your home is in negative equity, you might find it difficult to get a mortgage. If this is the case, you can either wait until your home has built up more equity or you can raise money for a deposit to cover the shortfall.
Avoid an early repayment charge
If you’re on a fixed-rate deal, you may be subject to your lender’s early repayment charge if you decide to remortgage onto a new deal before your fixed deal ends. As such, it might be wise to postpone your move until the end of the fixed rates term as you can then move house with a new mortgage without any penalties. You can arrange your next mortgage several months in advance so you can make the switch before you fall onto your lender’s standard variable rate.
Alternatively, you could remain with your current lender and port your existing mortgage to your new property. Most lenders allow for this and it’s one way to avoid their early repayment charges.
80% LTV mortgages are available on new build properties so are worth considering if you can meet the lender’s requirements. You can also get a new build property with an 85% LTV and in some cases, an 95% LTV, though there are fewer lenders offering the latter.
Lenders offer buy-to-let mortgages with an 80% LTV so you’re in luck if you’re looking to buy an investment property as you may be able to get a mortgage at this LTV.
If you have enough equity in your existing property, you should be allowed to remortgage onto an 80% LTV deal if you meet the rest of the lender’s criteria. However, if you are still midway through your fixed-rate deal, you might want to postpone your mortgage so as to avoid your lender’s early repayment charges.
Frequently Asked Questions: 80% LTV Mortgages
Provided you can raise the deposit, a mortgage with an 80% LTV is good because you will benefit from a lower interest rate. But if you want to save even more on interest, you could opt for a lower LTV to access better deals. If you can’t afford the deposit, mortgages with higher LTVs may be better for you.
For the best deal on an 80% LTV mortgage, talk to a member of our team. We have access to the majority of deals on the mortgage market and have the experience to know which deals are ‘best’ for your particular circumstances.
The ‘best’ loan to value is considered to be 80% or lower due to the savings that can be made on interest. So, if you can afford a higher deposit of 20% or more, your monthly repayments will be smaller over the deal period due to the reduced mortgage rates.
No! The deposit may be lower on mortgages with higher LTV deals but due to the added interest over the deal period, the monthly repayments on the mortgage will be higher.
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