Mortgage LTV vs deposit

Grenage

Dear all,

Deposits are important when you're buying a new house, because you are buying it for the current market value - the deposit effectively defines your LTV. When you re-mortgage (as I am soon to do for the first time) other factors come into play, which is where my question lies.

Let's say I bought a house for 140k two and a half years ago, with a 5% deposit; the house value has increased by 15k, and I've got a total of 20k equity in the property. Does that mean that mean I come to re-mortgage, my LTV for the application would be 77%? This is a bit new to me, but I assume that before you apply for a new mortgage, you get your house valued, apply using that value, and the mortgage company does their own check to make sure they agree?

Apologies if this is a bit of a simple one. 77% would just be one hell of a difference compared to the 95% I started with on a 5% deposit.

Thank you in advance for any advice you can throw my way.

kingstreet

Your current loan to value will be;-

the current mortgage amount (or amount you want to borrow) divided by the current property value, as confirmed by your current lender's indexed valuation system or new lender's surveyor.

Red for remortgage. Blue for customer retention product from existing lender.

dimbo61

If you bought for £140K and put down 5% deposit so £7K
Your property has you hope gone up £15K and you have paid off £13K so total equity of £35K
You just under 80% LTV which is better than 95% LTV

Grenage

That's great, thank you for clearing that up!

amnblog

Where did the £13,000 repaid figure come from?

Grenage

Hi again,

It was a ballpark figure based on my memory of a repayment status letter I received some time ago, although I plan add money to my existing equity when the mortgage's fixed term ends.

Let_Us_See

Unless you have made additional capital repayments I would be very surprised if you have reduced your mortgage by £13,000 in 2.5years. I think after this period the outstanding capital would still be around £125,000, resulting in a LTV of just over 80%. Hopefully, you will be able to squeeze under the 80% bracket for a re-mortgage.

Grenage

You're probably right, I'll need to dig through my paperwork to be sure. Worst case scenario, some extra money will have to be thrown in!

I suppose the truly worst case scenario is a bear attack, but you can't worry about everything.

Yorkie1

Grenage wrote: »

I suppose the truly worst case scenario is a bear attack, but you can't worry about everything.

:eek::rotfl: True