{"id":5054,"date":"2022-05-31T11:57:45","date_gmt":"2022-05-31T10:57:45","guid":{"rendered":"https:\/\/octagoncapital.co.uk\/?p=5054"},"modified":"2022-05-31T11:57:45","modified_gmt":"2022-05-31T10:57:45","slug":"how-does-ltv-work","status":"publish","type":"post","link":"https:\/\/octagoncapital.co.uk\/guides\/how-does-ltv-work\/","title":{"rendered":"How Does LTV Work?"},"content":{"rendered":"

LTV works as a percentage of a property\u2019s value that a lender is willing to lend you. For example, if you had 30% of the property\u2019s value to put down as a deposit, a lender could offer you the remaining money to buy the house through a 70% LTV mortgage.<\/p>\n

There are a range of different LTVs available to borrowers, and a variety of eligibility criteria to meet for them. Here, Octagon Capital takes you through the essentials on LTVs, including why they\u2019re important, what\u2019s a good LTV to have and how to calculate the one you\u2019ll need.<\/p>\n

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What Is an LTV Ratio?<\/strong><\/h2>\n

Your LTV (or Loan to Value), is a way of expressing the amount of money you\u2019re borrowing with a particular mortgage or loan compared to the property\u2019s\/asset’s total value.<\/p>\n

The LTV is expressed as a percentage \u2013 this being the percentage of the property\u2019s\/asset’s value you\u2019ve borrowed.<\/p>\n

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\"LTV-Loan-to-Value-percentage\"<\/p>\n

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For example, if the property\u2019s total value is \u00a3300,000 and you borrow \u00a3210,000 in the mortgage, the LTV on this will be 70%. While a 70% LTV mortgage will pay for a substantial chunk of the property, you\u2019ll also have to provide the remaining 30% through a deposit. Using our example above, if your property\u2019s total value is \u00a3300,000 and you borrow \u00a3210,000 through a 70% LTV mortgage, you\u2019ll have to offer \u00a390,000 as a deposit.<\/p>\n

It’s worth noting that LTVs don\u2019t just apply to mortgages, but are relevant for any type of secured loan, including Bridging Loans.<\/p>\n

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Why Is LTV Important?<\/strong><\/h2>\n

LTV is important as it represents the percentage of a property or asset’s total value the lender is willing to loan you. Deciding the LTV you\u2019re wanting to borrow is an important decision, that takes many factors into consideration, including your affordability, the amount you can provide in a deposit, and how much of a risk your ideal LTV is for a lender to loan you.<\/p>\n

The higher the LTV on a loan, the greater the risk the lender is taking on. If a lender has provided a high LTV mortgage to a borrower, and that borrower is unable to make repayments, the lender will make back less money if they have to repossess and sell the house the loan is secured on to.<\/p>\n

The lower the LTV the less the risk is for the lender. Therefore, you\u2019ll typically find lenders save their top deals for those wanting low LTVs, meaning if you can afford a higher deposit and a lower mortgage, you may get access to better deals.<\/p>\n

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What\u2019s a Good LTV To Have?<\/strong><\/h2>\n

As lower LTVs typically come with better deals, generally, lower LTVs are viewed as a more ideal mortgage to get.<\/p>\n

High LTVs are considered anything that\u2019s above 80%, and can come with higher interest rates than lower LTVs. For example, a 60% LTV mortgage may offer better deals than a 70% LTV.<\/p>\n

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\"Good-LTV-percentage-thumbs-up\"<\/p>\n

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However, while lowering your LTV can help you access better deals, for mortgages, your options will depend on your circumstances, including the property\u2019s value, how much deposit you can afford and other details surrounding your affordability.<\/p>\n

There are a range of different LTVs available for loans, including:<\/p>\n