WHAT IS MORTGAGE LTV ?
Mortgaging a property in the United Kingdom is a lengthy process and involves a lot of complex steps. A lot of inquiry is done by the lender about the borrower as the amount of mortgage is usually hefty and thus, the degree of risk is also high.
After doing a lot of calculations and assessing the risk, the lender and the borrower come to an agreement and complete the mortgage process. There are a certain number of technicalities in the process and one such course is Mortgage LTV. Let us understand more about the Mortgage LTV.
What is Mortgage Loan to Value Ratio?
The mortgage Loan to Value (LTV) Ratio is the ratio of two important amounts of monetary fund i.e., the total size of the mortgage and the actual amount of the property. We need to understand here that a person looking for a mortgage to buy a piece of property gets a mortgage sanction of an amount less than that of the property.
Let us understand the Mortgage LTV Ratio with the help of an example. Suppose a person wishes to buy a property worth £5,00,000 and the amount of Mortgage that gets sanctioned is £4,50,000, then the percentage of Loan to Value Ratio becomes 90% which is a pretty decent number. The remaining 10% is the deposit done by the borrower. Any percentage that is above 80% comes under the category of a high LTV Ratio. It is considered that a 95% LTV Ratio is typically the highest number.
Basics about Mortgage LTV:
- If the LTV Ratio of the Mortgageis less, then more is the deposit amount that the borrower is required to pay.
- The lender is expected to agree to lend the Mortgage if the amount of deposit is high. Thus, it is better when the LTV is lower.
- In case a person wishes to get his/her property remortgaged or even in the case of a first-time borrower, LTV will always make a difference in the entire process.
