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The Mortgage Mum - LOAN TO VALUE – what does it mean and why does it matter?
The Mortgage Mum – Money Matters!
LOAN TO VALUE – what does it mean and why does it matter?
When you speak to a mortgage broker they will constantly refer to your loan to value “LTV”. This is the difference between the mortgage amount and the value of the property. For example, a mortgage of £280,000 on a property worth £350,000 would be 80% LTV. An easy way to calculate this is to divide the loan amount by the value amount.
So what does this mean?
Well, for every 5% decrease in your LTV your rate will considerably reduce too, which means the bigger the deposit / equity amount the better the rate will be! There are also more opportunities available to those with a lower LTV. For example, Santander will lend up to 5.5 x income if your LTV is under 75% and you earn a minimum income of £100,000. If your LTV is over 75% this would not be honoured.
This is why if you are remortgaging it is crucial to make sure that the value you tell your lender is correct as you could be missing out on a better rate if you have carried out renovations to your property and the lender doesn’t realise the property value has increased.
You can contact The Mortgage Mum on her website www.themortgagemum.co.uk or on her social pages. Get in touch today if you have a mortgage enquiry or if you think you may be interested in becoming a Mortgage Mum yourself!