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What is a Loan-to-Value Ratio?

In simple terms, the loan-to-value ratio (LTV) refers to how much you are borrowing as a percentage of the property’s value. If, for example, you were looking to secure a loan of £1.5 million to buy a property of £2 million, this would be a 75% LTV mortgage.

Every time a lender is analysing a mortgage application, they are looking at risk. Think of the risk/reward ratio as a seesaw: if you put down a small deposit against a mortgage, there is more risk for you and the lender. The more you can provide as a deposit, the lower the risk.

Essentially, the risk that the lender places on a mortgage is always expressed in the interest rate your lender will offer you. Low LTV mortgages will usually come with lower interest rates. High LTV mortgages will usually come with higher interest rates.

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Who Can Get A High Loan-to-Value Mortgage?

For the majority of the market, 90% and 100% mortgages are something of the past, and very few lenders will offer such loans to buy real estate. Increasingly, lenders want to share risk with borrowers, and as such, they will request that borrowers put down a deposit on a property rather than borrowing nearly the total amount. There are exceptions, but these tend to be for high-net-worth individuals or borrowers with exceptionally strong financial footing. Lenders will consider every high LTV mortgage application on a case-by-case basis and the merits of your situation.

These days, very high LTV mortgages will only be available for a few select individuals and from a few lenders. For high LTV mortgages in the 75% range (as opposed to the 85%+ range), there are more options, but again, lenders will provide these mortgages for certain individuals only.

Other Considerations

It’s worth noting that LTV mortgages won’t be an option if you simply can’t afford to pay for a deposit. Lenders will still expect you to have a valid reason for wanting a high LTV mortgage, and you will need to be able to present a concise and logical explanation for your request. Scenarios such as having significant assets and wealth, but little cash saved up for a deposit, would be one such reason. A future liquidity event that would see you come into a significant amount of capital is another.

High-value mortgages aren’t for everyone, and while they can seem to be the perfect scenario, you will need to weigh the pros and cons carefully. This type of financing shouldn’t simply be viewed as an easy option if you can’t put the standard 40% deposit down. Instead, high LTV mortgages are ideal as a strategic and accommodating financing tool to be deployed if and when you have a valid reason for doing so. Lenders will want to see you are on solid financial footing and that you have assets and wealth that support your case.

Whatever your reason for applying for a high LTV mortgage, lenders will always look carefully at your ability to make monthly payments and how easy it will be to make these payments alongside your other day-to-day expenses. You will need to be able to showcase that you can make repayments easily and have the liquidity to be able to do so.

Making Your Case

When it comes to high LTV mortgages, every detail will count towards your case. Lenders can take things like an upcoming bonus, portfolio income and rental income into consideration, as well as your salary.

Enness will be able to help you present your case in the best possible light to lenders. Usually, your broker will review and discuss your assets with you, with the aim of identifying what a lender would be able to use as security and what will bring them comfort.

High LTV borrowers often find that a party like Enness will be able to pick out the facts and details of a case that you could potentially overlook or dismiss as being unimportant if you are operating alone. Your broker will be able to present these elements to lenders and, often, facilitate negotiations and use them to secure your high LTV mortgage.

High Loan-to-Value Mortgages On High-Value Property

As well as what percentage of your property’s value you want to borrow (i.e., 80%), how much you want to borrow (i.e., £2 million) will also play a part in the options you will have available.

Private banks tend to be able to cater to both higher LTV and higher property, so a 90% loan on a £1.5 million property, for example. Highstreet banks can offer mortgages in the 85% range on high-value property, but this will tend to be capped on property at the £2 million mark. High street lenders can find it challenging to lend against much higher value property.

For properties in the £2.5 million and above range, private banks will, once again, tend to be the go-to parties for financing, and they can offer larger high-value mortgages. That said, because they lend on a case-by-case basis, they may offer slightly less finance against a significantly higher value property.

90% Loan-to-value Mortgages On High-Value Property

Private banks tend to be the go-to operators for the highest LTV mortgages (90% and above) if you are buying a high-value property. As well as presenting your case to the lenders that operate in this space, your broker will also negotiate additional terms that will be beneficial to you. You may want the flexibility to pay back your loan early without repayment fees, for example. Enness will be able to help you negotiate this.

Example of a 90% LTV mortgage from a well-known and exclusive private bank:

Maximum LTV: 90%

Maximum loan: £1,800,000

Repayment method: Part & part repayment: 75% interest only & 15% capital & interest

Lender fee: 0.5% of the loan amount

Maximum term: 35 years (subject to retirement)

Interest rates: 2-year tracker @ 2.99% plus BOE base rate (No ERCs)

5-year tracker @ 3.14% plus BOE base rate (No ERCs)

2 year fixed @ 3.09%

5 year fixed @ 3.29%

10 year fixed @ 3.74%

85% Loan to Value Mortgages for Properties Worth £2+ Million

If you are looking for an 85% LTV mortgage and purchasing a high-value property, you will find a few more lenders that operate in this space. Here are some examples:

85% LTV Mortgage From A Highstreet Bank

Nearly all high street banks today offer maximum LTV mortgages of 60%. However, Enness will be able to help you secure an 85% LTV mortgage from high street lenders if you have the right profile:

Maximum loan to value: 85%

Maximum loan: £2,000,000

Repayment method: Capital & interest

Lender fee: £999

Maximum term: 40 years (subject to retirement)

Interest rates: 2 year fixed @ 2.63%

3 year fixed @ 2.94%

5 year fixed @ 2.95%

85% LTV Mortgage From A Private Bank

For larger properties (£3 million-plus), Enness can also secure 85% LTV mortgages. Again, you may be able to benefit from zero early repayment charges (ERCs) for two and five-year tracker interest loans. For example:

Maximum loan to value: 85%

Maximum loan: £2,550,000

Repayment method: Part & part repayment: 75% interest only & 10% capital & interest

Lender fee: 0.5% of the loan amount

Maximum term: 35 years (subject to retirement)

Interest rates: 2 year tracker @ 2.39% plus BOE base rate (No ERCs)

5 year tracker @ 2.54% plus BOE base rate (No ERCs)

2 year fixed @ 2.49%

5 year fixed @ 2.69%

10 year fixed @ 3.14%

Accessing High Loan-to-value Mortgage Finance

For lenders, the challenge with high LTV mortgages is that borrowers have relatively little exposure, but the lender must take on most of the risk. If you want this kind of mortgage, expect lenders will want to know you are highly committed, and they will need to be confident in your ability to repay your loan and maintain solid finances.

Lenders are exceptionally fastidious about who they will lend to for this kind of financing, and not every would-be borrower will be able to access the right lenders if you are operating alone. Very few lenders publicise that they offer high LTV mortgages, often preferring introductions from parties like Enness that help provide an additional layer of confidence in your profile.

Enness have experience negotiating high LTV mortgages on million-pound-plus properties. With connections to the lenders that operate in this niche area of the market, Enness’ brokers regularly source and negotiate 85%, 90% and, in some exceptional cases, even 100% LTV mortgages. Often, Enness’ team will be able to approach the only lender in the whole market that has the appetite and ability to offer this kind of finance.

Enness operates exclusively in your best interests to negotiate the very best deals and terms. However, the team’s understanding of your lender’s requirements will mean that your broker is ideally placed to find common ground and present the case that will get the lender to give the green light on a high LTV mortgage.

Lenders

There may be occasions when you are looking for a £1 million-plus mortgage, but you have restricted cash flow. If you have limited immediate cash or irregular income, most lenders will hesitate to let you borrow. This is the main reason why the number of mortgage providers able to offer 85% LTV mortgages and above is relatively small: not every lender can (or wants) to lend to borrowers that don’t have a standard income structure or who have complex income (i.e, multi-currency income, irregular salary, etc.)

However, Enness will be able to present your case strongly to the lenders that can consider you and can help you bring forward the assets or elements that would give a lender comfort: assets you are planning to liquidate for fair market price, an upcoming bonus, etc. Whatever your scenario, Enness will talk you through your options and the pros and cons that come with this kind of financing, helping you see where the opportunities are and how to avoid potential pitfalls.

To access high-value, high LTV funding from reputable parties, you will need to work with a firm like Enness that has the industry contacts and experience to secure the best deals for you. Exclusively working in your best interests and available to you 24/7, your broker will ensure you get the best possible finance package available on the market.

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If you would like to discuss high LTV mortgages in more detail, calculate theoretical scenarios or obtain rates for real-time situations, get in touch.

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