90% LTV mortgage (A complete guide)

In this brief guide, we are going to discuss 90% LTV mortgages, how to get a 90% LTV mortgage and what to be aware of.

What is a 90% LTV mortgage?

A 90% LTV mortgage is a mortgage where the mortgage lender hs only provided 90% of the mortgage based on the value of the home.  A 90% LTV mortgage means you will need to put down a mortgage deposit of 10%.

90% mortgages are now more common than before due to mortgage lenders shifting their mortgage eligibility requirements to fit the change in incomes in the UK and the rising house prices.

With a 90% Loan to value mortgage, you are essentially looking to borrow most of the value of the property and you can expect the mortgage rates to reflect the risk which the mortgage lender is taking by lending to you.

To be able to geta 90% mortgage, you may also have an existing mortgage an own 10% of the equity in your home.

Are you eligible for a 90% LTV mortgage?

• To be eligible for the 90% LTV mortgage you will usually need to either have a 10% mortgage deposit or at least 10% of the equity n a mortgaged property.

• You may also likely need to have a good credit score

• You will need to have the right to live and reside in the UK

• You will need to be at least 18 years of age

• You will still need to pass the mortgage lenders affordability check

Most 90% Ltv mortgages are obtained with the help of Government schemes such as the below:

To get a mortgage these are the government schemes which may enable you to get a mortgage. You can check if you are eligible for these government schemes by using a government scheme eligibility calculator.

Use a Government scheme

Government schemes help you reduce the amount of mortgage deposit you may need to put down, reduce the price of the property or create a structure that increases your mortgage affordability much sooner than it would have been.

Some of these include first-time buyer government schemes whilst others in this list are accessible to you even if you are not a first-time buyer.

Government schemes are not available to you if you are getting a buy to let mortgage.

The Government schemes include:

• Lifetime ISA– gives you a government bonus of £1,000 if you save a maximum £4,000 a year.
• Help to buy ISA– gives a maximum bonus us £3,000 if you save the maximum allowed of £12,000. Before you get either you should consider which is better. Lifetime ISA vs Help to buy ISA.
• Help to buy equity loan– gives you up to 40% as a 5-year interest-free equity loan. You begin to pay interest at 1.75 % after the fifth year and 1% plus RPI for every year thereafter.
• Shared ownership– You can buy between 25% to 75% of the property initially with a shared ownership mortgage and then buy more using a staircasing mortgage.
• Armed forces help to buy– similar to the help to buy equity loan but specific for the armed forces personnel giving them an increased chance of acceptance.
• Rent to buy– This is the right to buy scheme on which this guide is currently discussing. A different marketing name is just used. Watch out for this when shopping to avoid missing out on eligible properties due to confusion.
• Right to buy– allows you to buy your home at a discount price.
• Preserved right to buy– same as above.
• Right to acquire– similar to the above.

Depending on where you live, you may also be able to take advantage of home buying schemes provided by your local council. Example: In Norwich, the local councils provide the Norwich home options scheme.

How do you repay a 90% LTV mortgage?

You can repay a 90% LTV mortgage by either taking out a capital repayment mortgage or an interest-only mortgage.

By using a capital repayment mortgage, you will increase the equity you own in your property but by using an interest-only mortgage you will not increase your equity in the property and you will still have to repay any capital borrowed at the end of the mortgage using the capital repayment vehicle the mortgage lender approved.

When taking out a 90% LTV mortgage you will also have an option on which type of interest you intend to use.

You could use a fixed-rate mortgage, a tracker rate mortgage, a standard variable rate mortgage, a discount rate mortgage, a capped rate mortgage or a cashback mortgage.

Getting an interest-only 90% LTV mortgage may, however, be much harder due to the increased risk of default.

Use a mortgage broker for your mortgage in principle

You may want to use an independent mortgage broker to help you get a mortgage on your new home.

Mortgage brokers are important as they can access mortgage products from across the whole of the market in some cases.

This could be over 11,000 mortgage products. This may have some advantages rather than going directly to a mortgage lender.

A mortgage broker will look to understand your financial circumstances and then provide recommendations on which mortgage products may be suitable for you based on your mortgage affordability.

After giving you these mortgage recommendations, most mortgage brokers will seek your consent to apply for a mortgage in principle. 

This will allow you to shop for your home as more estate agents and sellers may take you seriously and it will also give you confidence that your mortgage is indeed a possibility before you make a full mortgage application. 

Once you have found a home you want to buy and are satisfied with the mortgage offer for your mortgage then the mortgage broker will then look to get you a mortgage offer.

This will come with a key facts illustration document that details the features of your mortgage including how much you will pay per month.

It will also contain information on if there are any limits such as early repayment fees, or annual overpayment limits.

If you are happy with everything you can then go on to secure your mortgage with the help of a conveyancer.

Your conveyancer will manage the legal searches on the property to ensure there aren’t any issues with it.

They will oversee the sales agreement to ensure it is in your best interest, they will manage the transfer of mortgage funds, exchange contracts with the seller or their conveyancer, and set a completion date with the seller or their conveyancer.

FAQs: 90 LTV mortgage

In this brief guide, we discussed 90% LTV mortgages, how to get a 90% LTV mortgage and what to be aware of.

If you have any questions or comments please let us know.