Skip to main content

If you’re trying to get on the property ladder, the standard advice is to get as big a deposit as possible. That’s solid advice but realistically there’s likely to be a limit on what most people can save. What’s more, there are often limits on how much money can be gifted. It’s therefore a good idea to do whatever you can to increase your chances of getting a high-LTV mortgage.


Understanding high-LTV mortgages

When you buy a property with a mortgage, the lender offers you a loan secured on the vehicle of the property you are buying. The amount of the loan as compared to the assessed value of the property is called the loan-to-vehicle ratio. As this increases so does the lender’s risk.

Each lender has to take its own decision on what it views as a high LTV mortgage. At present, it’s probably around the 90% mark. What’s more, anything about 95% is probably “no-go” territory for most lenders. That has not always been the case and it may not always be the case. For now, however, it appears to be the mainstream approach.


Be aware that deposits do matter

When it comes to buying property, your Plan A should always be to put together as big a deposit as you can. They do matter. If you qualify, you might want to consider the Lifetime ISA. This can boost your savings on your first home regardless of whether you buy new or existing property.

If people gift you money towards a deposit make sure you document it. Also, be aware of the potential Inheritance Tax implications if the donor dies within 7 years of making the gift. Ideally, you’ll get an agreement that these will be covered by their estate if they die.

Even so, that will only apply if there’s money in the estate to cover it. If there’s not, you could be looking at a 40% tax bill. You could also potentially get caught up in a dispute over the estate. This is one of the reasons lenders tend to be cautious about gifted deposits.


Credit records matter too

There might be a limit to the savings you can make but you can do your best to polish your credit record until it gleams. Similarly, keep in mind that a potential lender will almost certainly ask to see evidence of your bank statements. Think about what message they convey.

Remember that, post the Mortgage Market Review, lenders can’t just hone in on income levels and their multiples. They have to assess overall affordability. That basically means your current situation and your future prospects.

The fact that you’re looking for a high-LTV mortgage means that you’re already somewhat on the back foot. You, therefore, need to do your best to impress in other ways. This doesn’t need to be hard. It essentially means that you need to think before you spend.

Basically, make sure that you pay all bills in full and on time and make at least the minimum payments on any debts. Avoid debt as much as you can. If you must take it on, try to deal with it as soon as possible, especially consumer debt. Minimizing the interest you pay on this can help you to put more money towards your deposit.


Actively look for property for capital appreciation

Lenders assess LTV ratios on values rather than sales prices. Buyers typically need either connections or luck to buy a property for less than its assessed value. In the current market, you’d need a huge amount of luck. By contrast, strategy can help you find properties with a solid prospect of increasing in value.

The obvious example of this is “fixer-uppers”. As you improve their condition, they increase in value. Another example is properties in “up-and-coming” areas. As the area improves overall, so does the desirability of property there and hence its value.


Please contact us for any information

Blackpool: 01253 299 399 | Carlisle: 01228 558 899