85% Loan to Value (LTV) mortgages are mortgages that allow applicants to proceed with either 15% deposit for a purchase, or 15% equity within a property when looking to re-mortgage. As an example, when purchasing a property at £250,000 a lender will offer £212,500 as an 85% LTV mortgage, with the remainder of £37,500 being the deposit, which is 15%.
The range of 85% LTV mortgage products on offer include; Fixed, Bank of England Based rate tracker, Discount Standard Variable Rates (SVR) with the lender, Variable, Libor linked. These are the most common type of mortgage products being offered at this loan to value level. However, Capped Rate Mortgage products and Offset Mortgage products can also be offered at 85% LTV by some mortgage lenders.
Lenders arrangement fees and over payment facilities are the same at 85% LTV, as it would be for 90% LTV, as these are lenders criteria across their product ranges. However lending criteria is stricter when lending above 85% LTV, as lenders impose lower lending multiples against applicants’ income and the credit status needs to be at much higher level than for those looking to borrow a mortgage of up to 85% LTV.
For applicants looking to proceed with a deposit of less than 15%, interest rates on offer by lenders for those with 10% and 5% deposits will come with a premium than what would be available for someone proceeding with a deposit of 15%. The monthly mortgage payments can be significantly higher for a 10% deposit mortgage (90% LTV) when compared to a deposit of 15% (85% LTV) due a) higher interest rate being charged by lenders for less deposit and b) more lending on the higher rate. Therefore it would be advisable to explore the possibility on proceeding with a deposit of 15% over a deposit of 10%, in particular for those who are first time buyers.
Your home may be repossessed if you do not keep up repayments on a mortgage.
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