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Helping Find The Best LTV 50% Mortgages For You

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Buying a decent home is a dream for many people, but this dream isn’t always easy to achieve. Buying a property of your own can become mentally and financially stressful. This is when you start looking up mortgage deals. Mortgage deals can be convenient when you can’t pay the full price of your dream house at once. That’s why you need to know how to choose the best loan-to-value (LTV) ratio.

An LTV 50% mortgage, which is a mortgage deal with a 50% loan-to-value ratio, is generally considered a decent mortgage deal. But what does a loan-to-value mortgage mean? And how is it calculated? Does it have any pitfalls? At When The Bank Says No, we can answer all these questions and even help you find the best mortgage deals and help you compare mortgage rates that are right for you.

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What is a 50% LTV Mortgage?

LTV is short for loan-to-value, which means it’s the ratio of the mortgage, or the loan, compared to the total value of the property you’re buying. Simply put, it’s the percentage of money you need to borrow to buy your property. 

So in the case of a 50% LTV mortgage deal or an LTV 50 mortgage deal, the lender is paying 50% of the total value of the property, and the borrower is paying the other 50% as a deposit or equity towards the purchase price. 

In other cases, the customers could be looking to remortgage after they’ve already paid half the property’s value. In this case, they’ll also be requesting a loan worth 50% of the value of their property, which means that they, too, need a 50% LTV mortgage from mortgage lenders.

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How can a mortgage broker help me with an LTV Mortgage?

Here at When The Bank Says No, our professional mortgage brokers can help you figure out the best mortgage deal option that perfectly matches your financial status. 

A professional mortgage broker can help you with:

  • Interest rates
  • Mortgage periods
  • Repayment strategies
  • Arrangement fees and any extra charges
  • Mortgages for different situations, such as buy-to-let mortgages
  • Exit fees and early repayment charges
  • Helping you scan through your options to find the best mortgage deal 

How is the LTV Mortgage calculated?

We’ve mentioned that an LTV mortgage is the ratio of the mortgage value to the total value of the property. Here’s how to translate that definition into numbers. 

To calculate the percentage of an LTV ratio, apply this simple formula: 

(Loan value/property value) x 100 = LTV. 

For example, if you’re buying a house worth £100,000, and you already have £40,000 as a deposit or ad equity, then you need a loan worth £60,000. To calculate the percentage of the LTV mortgage deal that you need, you’ll divide £60,000 by £100,000 and multiply it by 100 

(60,000/100,000) x 100 = 60% LTV. 

Pretty easy, right? 

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How is the 50% LTV Mortgage repaid?

There are two scenarios to repay your LTV mortgage: You either apply for a repayment mortgage deal or an interest-only mortgage deal. 

In a repayment mortgage deal, you pay monthly instalments that cover both a portion of the loan and its interest rate. This means you’ll pay off your debt and gradually increase your equity. Within a few years, you could consider remortgaging and looking for a better offer with a lower LTV percentage. 

The second option is applying for an interest-only mortgage deal. This means that you’ll only pay the loan’s interest rate, and then pay the loan’s full value, or the outstanding mortgage when the mortgage term ends. However, to get the lender’s approval on such a deal, you need to provide proof of a viable way to pay off your mortgage once the interest payments have finished.

Is 50% LTV considered a good ratio?

Yes, 50% LTV is considered a really good ratio that’ll allow you to find a decent deal with relatively low interest. In fact, as a rule of thumb, any LTV ratio that’s under 80% is considered a low LTV ratio. 

This is because when the LTV ratio is low, such as 50%, the lender isn’t taking on a huge risk of losing their money. For that reason, you’ll easily find a decent mortgage deal for your dream house. 

Frequently Asked Questions

Will mortgage rates be better if I have a bigger deposit?

Absolutely! The bigger your deposit, the less risky it is for your lender, and the cheaper your mortgage rate will be. That gives you a wide range of mortgage rate options to choose from so you have the luxury of being able to compare mortgages.

You’ll then be able to choose deals with lower costs and fewer interests that generally best suit your financial status. The more you’re able to deposit, the less interest you’ll pay over the total lifespan of your mortgage deal – and the better deals mortgage brokers, like us here at When The Bank Says No, will be able to find for you.

LTV ratios that score above 80% are considered to be relatively high. Clients that need more than 80% LTV mortgage deals will need to pay more expenses to get the deal. They’ll need to pay private mortgage insurance, higher interest rates, and higher mortgage fees – making monthly repayments higher.

Mortgage providers set these terms because high LTV rates are considered risky for the lender. After all, they’re paying a huge portion of your property. 

If, for any reason, the borrower wasn’t able to make their repayments, the lender faces the possibility of not getting all their money back when they sell the borrower’s property—especially if the house’s value decreases. 

Alternatively, lower LTV ratios protect the lender’s money from changes in the house’s value because they’re not pouring as much money into the property as in the case of high LTV ratios. 

In the UK, the average LTV ratio depends on whether this is your first time buying a house or you’re moving into a new one. Predictably, first-time buyers usually need a higher LTV ratio.

Meanwhile, home movers who are looking for a second-home mortgage tend to have a lower LTV ratio, since they have more assets. 

The average ratio in the UK for first-time buyers is around 82% LTV rate. On the other hand, clients who are moving from one house to another need an average of 74% LTV mortgage rate. 

Of course, the average varies based on multiple factors, such as your age, the amount of money you make, and the total value of your house. 

For example, a young adult in their early twenties won’t have as much savings to pay a deposit for their first house. Meanwhile, a person in their late 50s will have enough equity to pay a decent deposit and get a low LTV mortgage to move into their new house.

Applying for an LTV mortgage with a ratio as low as 50% gives you many advantages, such as:

  • Starting your purchase with a decent amount of money for an initial deposit or equity in your property. 
  • Having a wide range of different mortgage providers to choose from. 
  • Gaining access to attractive interest rates that are much less than the average. Just remember to always check the deals carefully and scan them for any early exit or overpayment penalties. 
  • Having more payment options to choose from, such as interest-only deals, tracker mortgages, capped, a lender’s standard variable rate, or a fixed rate mortgage. 

In the end, the more you’re able to pay as a deposit upfront, the less interest you’ll need to pay during your mortgage period. 

As good as a 50% LTV mortgage deal may seem, they do come with a few downfalls. The disadvantages of getting a 50% LTV mortgage include: 

  • Saving up a sizeable sum of money for the 50% initial deposit. 
  • Passing the lender’s affordability check. You need to have a good credit history to get accepted as a borrower, even if you have half the property’s value as equity or a deposit. In other words, a low credit score or poor credit rating can risk your chance to get a decent offer.
  • Having too many deal options to choose from. This means that you need to be extra careful with your research when deciding which mortgage loan is right for you. 
  • Falling into the mistake of putting all of your life savings into your deposit. If you do so, you won’t have any funds for emergencies. 

While requesting an LTV mortgage that’s as low as 50% gives you more chances to find better offers, you’ll still need to meet a few criteria to be eligible for a 50% LTV mortgage deal. 

Of course, you’ll need to provide proof of your ability to pay the initial 50% deposit. Then, you’ll need to prove that you’re able to afford your monthly payments. Those with a poor credit history may also struggle to convince the bank or building society who are offering you the mortgage that you’re able to repay.

Usually, mortgage providers will give you 4.5 times your annual salary at most. So, if you save up half the house’s value as a deposit, but your income is low, you may not be eligible for a 50% LTV mortgage deal. 

For example, if you plan to buy a house worth £200,000 with a 50% LTV mortgage, you’ll first need to save up £100,000 to pay a 50% deposit. 

After saving up for the deposit, you need to make sure that your annual income is at least £22,300. That’s because when you multiply it by 4.5, you’ll get about £100,000, which is the 50% LTV mortgage you need. 

If your income is less than £22,300, you won’t be eligible for a 50% LTV mortgage. That means you’ll either need to consider cheaper properties or save up a bigger portion of your dream property and apply for a mortgage with a lower LTV ratio. 

Below is a breakdown of all expected fees:

Arrangement Fee, Product Fee, or Completion Fee 

This fee is for the mortgage product. If this fee isn’t refundable when the deal fails, you could add it to the mortgage and pay it when the application is approved. The arrangement fee usually ranges from £0 to £2,000.

Booking Fee

This fee is for applying for a mortgage and it’s usually not refundable. Some providers include it in the arrangement fee, while others add it as a separate fee depending on the size of the mortgage. The booking fee ranges from £99 to £300.

Valuation Fee

This is for the evaluation that the mortgage provider will do to value your property and ensure that it’s worth the mortgage. You could expect the valuation fee to be anywhere from £250 to £1500, based on property value.

Missed Payment

Most mortgage providers will charge this fee when you miss a payment. The amount of charges will depend on each provider’s rules.

Early Repayment Charge

This fee covers the lender’s costs if you pay all or part of your loan before the agreed period. However, this fee doesn’t apply to all deals, so check the rules of the mortgage provider carefully if you plan on making an early repayment. 

The charges usually range from 1% to 5% of the early payment’s value.

Exit Fee or Closure Fee

This fee is paid after repaying all your mortgage. It includes setup and property maintenance. However, if you’ve paid an account fee, you probably won’t need to pay this fee. The exit fee could cost you anywhere from £75 to £300.

Higher Lending Charge 

You’ll only need this fee if your mortgage deal is above 80% LTV. This fee pays for the lender’s insurance in case you can’t repay the mortgage and the lender will need to sell your property at a loss. The charges are usually 1.5% of the mortgage.

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