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Finding You The Best 85% LTV Mortgages

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85% LTV Mortgages: Your Path to Owning Property

With the economic complexities of the mortgage market in the UK, buying properties can be an overwhelming experience. There are a lot of factors to consider: your financial capabilities, the type of property you want to own, its availability, and the state of the market. For the average buyer, 85% LTV mortgages can be fruitful; you won’t have to save a lot of money compared to higher LTV mortgages or struggle to find a lender.

If you’re overwhelmed by the process, our team has gathered all the information you need to guide you on your mortgage journey. Speak to one of our mortgage experts at When The Bank Says No today to take the mystery out of 85% LTV mortgages and get you ready for your first step on the property ladder.

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What’s an 85% LTV Mortgage?

LTV refers to how much money you’ll borrow compared to the total value of your property. An 85% LTV mortgage means you borrow 85% of the total value of your property and pay 15% as a deposit.

For instance, if you want to buy a house worth £200,000 with an 85% mortgage, you pay £30,000 as a deposit and borrow the remaining £170,000 from a mortgage provider. That’s usually a bank or building society.

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What are the mechanisms of 85% LTV Mortgages?

The first step of getting an 85% LTV mortgage is saving money for a deposit (15%). How much deposit you’ll need in £ will depend on the overall cost of the property you’re interested in.

Having a secured deposit reflects financial responsibility, which all lenders look for in mortgage candidates.

Then, you need to find a mortgage provider who’s willing to lend you the remaining 85%. During this stage, you’ll have to prove you’re financially capable of repaying that loan.

That may include providing documents of your income, investment papers, etc.

If you secure a mortgage deal and buy a new house, you start repaying the loan on a monthly basis with additional interest based on mortgage rates at that time.

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When you think you’ve hit that brick wall and have all but given up hope of finding mortgage finance, When the Bank Says No are here to turn your ‘No’ into a ‘Yes’. We have access to a range of specialist lenders who are willing to help those that the High Street banks just won’t touch. Get in touch today and see how we can turn your dreams into a reality.

What are the available interest rates and mortgage rates for 85% LTV Mortgages?

There are two types of interest rates on 85% LTV mortgages: fixed rates and variable rates.

With fixed-rate mortgages, your interest rates remain unchanged with no regard to external economic factors. That means you pay the same amount of money every month even if interest rates rise on a national basis. Fixed rates usually last for a specific period, 2-10 years depending on the mortgage deal.

On the contrary, the interest rates of variable-rate mortgages can change over time.

This change depends on the type of your mortgage; a tracker mortgage adheres to the base rate of the Bank of England. If the Bank of England base rate, however, remains unchanged, so will the interest rate of your mortgage.

If the set period of your fixed-rate mortgage is over, you move to a lender’s standard variable-rate mortgage (SVR). This is where the lender can change the interest rates of your mortgage based on their personal standards.

Is a Fixed-Rate 85% LTV Mortgage better than a Variable-Rate One?

Both have advantages and disadvantages. Your choice should depend on your financial circumstances.

A fixed-rate mortgage is stable and secure. However, it becomes a disadvantage if the interest rates decrease on a national basis.

If you want to pay your mortgage earlier than what’s agreed upon or pay more than the agreed monthly instalments, you’re more likely to face early repayment charges in fixed-rate mortgages. This is so you can compensate your lender for the money they’ll lose over the remaining mortgage payments.

If you’re financially capable, a tracker mortgage might be a good option. You can have a stable variant-rate mortgage for a while. If, however, the base rate decreases, so will the interest rates of your mortgage. Even if it increases, you’ll still be able to cover the expenses.

Frequently Asked Questions

Are there any advantages or disadvantages of 85% LTV Mortgages?

Most of the advantages and disadvantages of 85% LTV mortgages are relative. That is, they’re considered advantages or disadvantages compared to other more/less favourable scenarios:

Advantages

  • You’ll find a lot of mortgage providers that are able to offer an 85% loan.
  • The deposit is more affordable than higher LTV mortgages.
  • Less monthly payments than 90-95% LTV mortgages.

Disadvantages

  • You still need to save a large sum of money.
  • Higher interest rates than mortgages with lower LTV.
  • You’ll have more limited options than lower LTV mortgages.

Lenders want to make sure you’re capable of repaying their loan. So, they’ll mostly look into your finances. You need to have a stable, sufficient income. It proves you can pay monthly instalments without delay.

This goes along with your spending records. Even if you have a sufficient income, spending too much money can make lenders think of you as a risky investment.

Lenders will also check your credit score to see how you handled previous debt. The higher your score, the more chance you’ll have of securing a good mortgage deal.

On the other hand, if you had CCJ, IVA, or filed for bankruptcy, that will lower your chances.

If you’re self-employed, you may have a harder time getting an 85% LTV mortgage, as you don’t have a stable income.

In that case, you can provide bank statements, a profit and loss statement, etc. You can also provide client contracts as proof of future work.

 

Bad credit is not for every lender, and some may outright refuse to lend to you if you have an adverse financial history. This situation will increase the risk they face, which is already heightened due to the reduced deposit you are supplying with this product.

However, this is not true across the board, and there are some lenders out there who will still consider providing you with an 80% LTV Buy to Let mortgage even with an imperfect credit history. Lenders just need to be sure you can afford to repay the loan if the property is empty or the tenants have not paid the rent.

If you live in England or Northern Ireland, you’ll be forced to pay the Stamp Duty Land Tax (STDL) if your house is worth more than £250,000.

First-time buyers don’t have to pay STDL on houses worth up to £425,000. For non-residential properties, STDL’s threshold is £150,000.

If you live in Scotland, you’ll pay Lands and Buildings Transaction Tax (LBTT) and Wales has the Land Transaction Tax (LTT).

You should also consider solicitors, mortgage arrangement fees, account fees, and booking fees. 

If you’re a first-time buyer, the process might be overwhelming. So, it’s best to use a mortgage broker. If you decide to go through the purchasing process yourself, you’re going to have to do a lot of research. There’d be more room for errors.

You might end up with an unfavourable mortgage deal. A mortgage broker, however, has a vast knowledge of the market. They can also find deals that aren’t available to common buyers.

Of course, broker fees may be necessary to pay, but it’s a small price to pay if it helps you get a property with the property value of your dreams.

If you have a limited budget or are looking for a specific property, a mortgage broker can secure a mortgage deal that suits your needs in a shorter time and with better chances of success.

That’s why working with When The Bank Says No is such a good idea – you get all the rewards with far less hassle – and we can compare mortgages for you to make sure you get better deals.

If you decide not to hire a mortgage broker, the easiest way is to approach big banks, such as HSBC or Santander.

You can also check the bank you’re currently using. Being a customer of the bank doesn’t affect your chances of approval.

You can also approach building societies. Since building societies are owned by customers, they can be more flexible. So, you may have a better chance with a building society if a bank rejects your application.

There are online tools that can help you compare available offers and find the most suitable deal for you. However, they don’t always produce the most accurate results. So, you should only use them to get a general idea of the available offers. After which, you can work with us to provide you with an in-depth understanding of the mortgage deals being offered to you before you make a mortgage application and sign on to a mortgage rate for years to come.

Since you only pay the interest rates of your loan every month, lenders require a higher deposit. Most lenders will offer 60-75% LTV with interest-only mortgages.

No, you can’t. The 15% deposit is a prerequisite to getting an 85% LTV mortgage.

If the deposit is out of your budget, you might want to consider higher LTV mortgages.

You can apply for a 90% LTV mortgage with as low a deposit as 10%. In some cases, you can even apply for a 100% LTV mortgage. However, the interest rates of these mortgages will be substantially higher and the costs involved in making monthly repayments will be substantial.

The best way to increase your chances of getting an 85% LTV mortgage is by meeting the affordability criteria for that loan – but it may differ from lender to lender. Typically, showing you have an annual income that can reliably repay the mortgage amount, a 15% deposit amount, and a good credit history will all factor into the affordability criteria.

If you’re not sure whether you can afford a 15% deposit or pay the monthly instalments, you can take a guarantor mortgage. A guarantor mortgage is where a family relative or a friend helps repay your loans in case you can’t.

Usually, guarantors offer their properties or savings as a safety net against your mortgage.

They give your lender ease of mind, as they’ll be sure they can get their payments in full, even if they don’t come directly from you. This may be a stipulation of the lending criteria if you’re looking for a residential mortgage or investment property with previous poor credit experience.

Yes, you can! Lenders don’t look favourably at new-build loans because the value of your property may fall after several years.

However, an 85% LTV mortgage is still quite manageable. In fact, some lenders offer up to 90% LTV mortgage deals.

It’s complicated. Lenders usually think of buy-to-let property mortgages as a risky investment, as there’s more room for financial hiccups than in residential properties. A buy-to-let mortgage may be seen as risky because a tenant can be late to pay their monthly rent, for example, and that rental income won’t then be available to make your mortgage payments.

That’s why the lending requirements are much stricter. In most cases, the minimum deposit is around 25%.

You can even find an 80% LTV mortgage. However, these deals are usually reserved for candidates with previous experience in running properties.

Securing the loan can be more difficult if you want to buy a new-build house.

An off-plan new-build house, for example, may face delays in the build schedule, which means you won’t receive any rental profit for a while, affecting the buy-to-let mortgage repayments too.

It’s also difficult to prove that a new-build house will attract tenants. So, you can’t guarantee stable returns.

Unfortunately, it can be quite tricky to secure an 85% LTV mortgage if you’re not a UK resident.

Over the years, UK banks made their lending rules more stringent. Some banks stopped lending to non-residents altogether. This is due to the increased risk factor.

If this is your first time in the UK, or if you’ve lived in it for a while but left it for a long time, you won’t have a good credit history. You need to live in the UK for 2-3 years to be eligible for a mortgage. These three years give you enough time to develop a good credit history.

Otherwise, it’d be difficult to prove you’re eligible enough.

It also wouldn’t help if you don’t have much time left on your work visa. As a non-resident, you’re more likely to get a 75-80% LTV mortgage. Even then, you’re going to go through more stringent procedures than UK residents.

Yes, you can! If you can secure the deposit, you can be eligible for an 85% LTV mortgage. In fact, if you have enough home equity in your current home, you can use it to pay for the second property.

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