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Expert advice for those seeking a 60% LTV mortgage

Looking for an 60% Buy to Let? Our mortgage advisors are here to help you secure the right product for your needs, whatever your circumstances.

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Remortgaging doesn’t have to be tricky, whether you are looking to remortgage to consolidate debt, buy another property or finance home improvements.

If you are in the market for a 60% LTV then you are likely in a better position than most as this will mean that you have a good deposit or decent equity. While not typically used by first-time buyers, as they won’t often have a deposit that sizeable, 60% mortgages are popular mortgage loans, especially for those with a lot of equity.

We’ll walk you through everything you need to know about 60% LTV mortgages. From what they are and how they work to all the eligibility criteria you need to be accepted. So let’s get started!

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What Is a 60% LTV Mortgage?

LTV stands for loan-to-value and refers to the percentage of the value of your property that you can borrow against. With 60% LTV mortgages, you can borrow up to 60% of your home’s value. For example, if you buy a house valued at £200,000 with an LTV of 60%, you’ll receive £120,000 as your loan. The remaining 40% you’ll pay as a deposit or home equity.

In general, a 60% mortgage is considered low risk. This means if you apply for it, you’re a low-risk buyer, according to the lender, which is why it’s often pretty easy to qualify for 60% mortgages unless you have significant bad credit of course.

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What’s Home Equity and Why It’s Important with 60% LTV mortgages?

When you take out a mortgage, you are borrowing money from a lender to buy your home. The value of the loan that you owe is referred to as the loan-to-value (LTV) ratio. This LTV ratio refers to the percentage of your property’s value that you are borrowing.

Home equity is the portion of the property that you truly own, and can be seen as an asset on your balance sheet. It can be beneficial in providing financial security and flexibility when converting your equity into cash.

For instance, if your property is valued at £200,000 and you owe £120,000 on your mortgage, you have £80,000 in home equity.

Homeowners in the UK understand that having at least 60% LTV gives them more financial freedom when it comes time to sell their homes because they will have more equity in their property. 

This gives them more negotiating power and access to more types of mortgages. Plus, it can help them unlock more attractive interest rates and repayment terms on their loan. Ultimately, this aids borrowers save money over the lifetime of their mortgage loan.

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How important is LTV when calculating mortgage rates?

Generally speaking, when you apply for a 60% LTV mortgage, lenders will see you as a low-risk buyer. Why? Because simply you’re borrowing less money. Thus, you’re taking fewer risks. Lenders often reward your low-risk approach by providing a preferential interest rate. Let’s explain more, for example, you want to buy a £200,000 home, and you borrow £160,000 in an 80% LTV mortgage.

Unfortunately, the price of your property goes down for some reason. In that case, you might not be able to follow the repayment schedule, meaning the lender might not get his money back. In such cases, lenders put high-interest rates, to ensure they get their money back. On the other hand, if you’re buying the same £200,000 property but borrowed only £120,000 (60% LTV), in the worst-case scenario, the lender will sell your home and get their money back.

How Can We Help as Mortgage Brokers?

Now that you know a bit about 60%-LTV mortgages in the UK, you might be wondering how When the Bank Says No can help you get a mortgage?

As expert mortgage brokers, we know how daunting applying for a mortgage is, and that’s why we can help you in different ways. There are three key ways we can assist you with this type of loan:

Advice on the suitable Mortgage Type

With all the mortgage types available, it’s confusing for buyers which one would be best. For that reason, we’ll provide you with helpful advice on what type of 60% LTV mortgage are likely to be available to you based on your personal circumstances.

We’ll take your financial situation and the type of property you want to purchase into consideration to ensure your application has a high chance of approval. We’ll also guide you on when it’s best to refinance a mortgage at a higher LTV.

Better Mortgage Deals

In addition to doing all the necessary routine and paperwork, we can save you money and get you the best 60 LTV mortgage deal for your circumstances.

As a whole of market mortgage broker, this means we are able to give you access to a wide range of lenders and mortgage options with competitive interest rates. We compare mortgage deals to find the best rates for you, and we also have access to exclusive deals and discounts that you may not be able to find by shopping around yourself. This means we can often give you access to better rates than what’s publicly advertised.

Making the Process Easier

Finally, we can help make the entire process easier for you, from start to finish. We’ll take care of all the paperwork and documentation for you, as well as liaise with lenders and other parties on your behalf.

This takes the stress out of applying for a 60% LTV mortgage in the UK, making it much more straightforward for homeowners.

Frequently Asked Questions

What criteria are taken into account with a 60% LTV mortgage?

In addition to the deposit, there are some other criteria that you need to meet in order to be eligible for 60% LTV loans.

Income

You have to ask yourself, do I earn enough to borrow such money? Not all lenders put the same criteria for accepting an application. However, it’s common for lenders to take into account your current salary and any other sources of income that you have (investments or other forms of profit) into account.

Lenders usually prefer applicants with steady incomes and an ideal debt-to-income ratio. In most cases, you can borrow around 4 to 4.5 times your annual salary. That’s why having a stable income is critical for a higher chance of approval.

Job Stability

Lenders also consider your work status. Whether you’re self-employed or new to a job, lenders want to know more about your job to ensure you have a stable position and salary to cover your mortgage.

Your Spendings

Having enough money in the bank or a stable job isn’t enough on its own to make you eligible for a 60% LTV mortgage. That’s why lenders will look at your spending habits to ensure you can cover monthly payments. They’ll need to check your outgoings including use of credit cards and how much you spend on bills, groceries, entertainment, etc.

Credit Score

Lenders will also check your credit score to see your history of managing debts. With a good credit score, it’s far more likely that you’ll qualify for a 60%-LTV mortgage. That’s because your good credit history will give lenders more confidence that you’ll be able to make the regular mortgage repayments required on the loan.

There are several types of mortgages available in the UK market. The two main types of 60% LTV mortgages are fixed rate mortgages and variable rate mortgages.

Fixed Rate Mortgage

This type of mortgage has an interest rate fixed for typically one to five years. A two to five-year mortgage term is the most common; however, you can get longer fixed mortgage deals.

Fixed-rate mortgages are suitable for people who want to avoid the risk of variable repayments. This way, they pay the same amount over a specific time period despite the interest rate changes.

On the flip side, fixed mortgage rates often have higher interest rates than other mortgage types. That’s because you don’t take the risk of paying less or more on a monthly or weekly basis.

This type of mortgage rate is suitable for those who want to stick with a specific budget. 

Variable Rate Mortgages

Variable-rate mortgages typically offer better rates than fixed-rate mortgages, as they are affected by changes in market rates. That means your repayments won’t stay the same and might decrease or increase, considering the interest rate changes. 

Many prefer this type of mortgage rate as they aim to pay fewer repayments in the long run. However, the interest rate is never guaranteed and could go up or down depending on market conditions.

Variable rate mortgages are either tracker, discounted, or SVR (standard variable rate).

Discounted Mortgages

Discounted mortgages offer an interest rate discounted against the lender’s Standard Variable Rate (SVR). These are ideal if you want more flexibility with how much you can repay but still benefit from the lower rates that SVRs offer.

Tracker Mortgages

In this type of mortgage, the interest rates are at a level above an external financial indicator, usually the Bank of England rate. That means the interest rate will increase or decrease depending on the Bank of England base rate.

SVR (Standard Variable Rate)

SVR or standard variable rate varies according to the state of the market. Your lender could transfer your mortgage to their SVR when your initial mortgage agreement expires.

This will usually be higher than the rate you used to pay. That’s why you might consider remortgaging to get the best possible deal.

60% LTV mortgages are one of the cheapest you can go for. They’re also popular among homebuyers and remortgagers for several reasons.

Low LTV ratio

Compared to other mortgage types, 60% LTV mortgages are one of the cheapest. How much deposit you are able to provide will usually get you access to a low-interest rate. This comes in handy as you’ll pay fewer repayments and save more money in the long run.

Getting better deals

On top of the low-interest rates, lenders often offer fixed-rate, tracker, and discount deals. So if you have enough for a deposit, you’re likely to get a deal that suits your circumstances.

Ease of Repay

As the average house price in the UK is £296,000 (as of October 2022), mortgages remain one of the best methods to buy a house. That’s because you pay little by little monthly.

In addition, if you get a low-interest deal, you might end up paying lower monthly repayments than the average rent in your area.

Furthermore, you can opt for long-term mortgages if you don’t have enough cash for a deposit. Even though it’s a long commitment, it remains an affordable option for many.

Equity build-up

Another benefit of these mortgages is that they let you build up equity in your home faster than other types of mortgages would. 

This is great for building wealth, as having more equity in your home can give you more options down the line when it comes to refinancing and other loan products.

Loan Flexibility

Lastly, 60% LTV mortgages give you more flexibility in terms of loan repayment.

Since the loan requirements are easier to meet, you’re more likely to arrange a payment plan that suits both sides. That means you can schedule monthly or bi-weekly payments, depending on your situation and availability.

Yes, you can, as long as you have enough money for a 40% deposit, or sufficient equity, and you meet the lender’s financial requirements.

Before you go ahead and apply for a 60% LTV mortgage, there are some things you should be aware of. Even though it’s a suitable and affordable option for many, it might not be your best option. Let’s see why.

Saving Up for a Deposit

It’s always better to have enough money for a big deposit when applying for a 60% LTV mortgage. However, it’s pretty challenging to save up this amount of money. 

For example, if you want to buy a house within 2–3 years, you might have enough time to save up for a deposit. Conversely, if you want to purchase a home more quickly, you might consider higher LTV mortgages.

Debt

Taking a mortgage requires you to take up a long-term debt, it can be somewhat nerve-wracking. A mortgage requires you to pay a large amount of money each month over a long period. Considering the interest, you’ll inevitably end up paying a lot more back than what you’ve borrowed.

Variable Mortgage Payments

In some mortgage deals, the monthly payments are variable. They might increase or decrease depending on some factors. Some people prefer going for variable-rate mortgages as they expect their monthly repayments to decrease. However, it’s not guaranteed.

The processing time for your application will depend on the lenders you are working with. However, typically, it should take about four to weeks from when you submit your application until when funds are available for withdrawal.

In general, it’s better to aim for mortgages under 80% LTV. However, there are some mortgages with loan to value of up to 90%. High mortgages seem to be better if you want to buy your property quickly, but the mortgage rate will be much higher than if you’d taken out a 60% or even a 50% LTV mortgage.

How Easy Is It To Get a 60% LTV Mortgage?

As it’s one of the cheapest mortgages, getting accepted for a 60% LTV mortgage is often quite straightforward. The first thing you should do is to have enough for a 40% deposit, which is often the most challenging part. Whether you have a big chunk of savings or a large amount of home equity, you might be eligible for a 60% LTV mortgage.

It’s also worth noting that most people who raise money for a 40% deposit have already owned properties before. On the other hand, it’s more challenging for first-time buyers. Over the past decade, the prices of houses in the UK have dramatically increased. That means many people now have a small mortgage for their valuable homes. Let’s say you have a mortgage of £100,000, and the value of your home has increased to £200,000. That means you now have a 40% equity of £80,000, which is enough to get a 60% LTV mortgage with lower interest rate.

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