LTV explanation needed...

graham17_2

Hi,

I'm looking to buy a house soon with my fiancee. I just had a quick question about LTV that I would like explained please.

A house I'm looking at is valued at £90k but I could get it for a fixed price of £87k. I'm looking at getting a mortgage with LTV 75% as we'd get a better interest rate that way. Some banks put this as 25% deposit, some put it as 75% LTV.

The way I understand it, the mortgages would work on 75% LTV, so to get that rate they would give me 75% of the value (£90k), which would work out as £67500. So to get that rate, I'd need to put down £19500 (£87000 - £67500) as a deposit.

The reason I'm getting confused is because I also think of it was a 25% deposit, i.e. 25% of £87k, which is £21750.

So basically, would I need to put down £19500 or £21750 as a deposit to get that better rate?

Also, why do some banks put it as 75% LTV, and some as minimum 25% deposit? Can someone explain the difference, if any please.

One other thing I have a question about is with regards putting my fiancee on the mortgage. Currently she works on bank staff hours. So basically, it's not a set amount of hours, she is technically a relief worker and hours can change. She will soon be on a proper contract with a set amount of hours. So I just wanted to check will she need to have contracted set hours to be put on the mortgage, or would they quite happily put her on the mortgage on her current job? We don't need her wage to be able to borrow the amount we want, so her wage isn't a great problem, it's just whether they'd be happy for her to be on the mortgage without set contracted hours as that's something that's important to us.

Hope I've not bored you all to sleep :-)

Many thanks in advance,

Graham.

beecher

The LTV/deposit will be calculated on the price you pay, rather than the valuation. So for an LTV of 75%, you need a deposit of £21,750 leaving you with a mortgage of £55,250. They use whichever is lowest between the valuation and the price paid.

75% LTV and 25% deposit are exactly the same thing.

Not sure about your other query so hopefully someone else will be around

Mrs_Bumble

One other thing I have a question about is with regards putting my fiancee on the mortgage. Currently she works on bank staff hours. So basically, it's not a set amount of hours, she is technically a relief worker and hours can change. She will soon be on a proper contract with a set amount of hours. So I just wanted to check will she need to have contracted set hours to be put on the mortgage, or would they quite happily put her on the mortgage on her current job? We don't need her wage to be able to borrow the amount we want, so her wage isn't a great problem, it's just whether they'd be happy for her to be on the mortgage without set contracted hours as that's something that's important to us.

Do you need to rely on her income for the mortgage? If the mortgage is carried on your income then it won't matter about your girlfriends hours etc. and she will be able to go on the application. If you need to include her income then you may well struggle as your girlfriend is effectively a temp with no guarantee of working at all has she?.

As per beecher above to work out a LTV you divide the amount of mortgage you require by the value of the property, so if you negotiate the lower price and are looking for a 75% LTV then = 65250 / 87000 = 75% LTV

graham17_2

Hey all,

Thanks very much for the replies - makes sense now :-)

Cheers,

Graham.