What does Loan to value (LTV) mean?
Loan to Value, known as LTV, describes the maximum amount you can borrow from a lender expressed as a percentage of the value of a property, and as a result, how much your deposit funds or equity must be.
For example, if a property is valued at £100,000 and you have £15,000 to put down as a deposit, you will require a mortgage of £85,000 which gives a loan to value of 85%.
Lenders will offer their products at different LTV’s and deposit amounts. Products commonly range from 50% to 85% LTV. You can always put in more than the required deposit. The LTV’s are there to give the maximum percentage of the property value the lender is prepared to lend.
Loan to value (LTV) ratios and mortgage rates
The loan to value ratio reflects the level of risk a lender associates with lending their money.
If the LTV is lower, the lender won’t have to provide as much money towards the cost of a property, which reduces the level of risk they will take on. The risk is also reflected in the rates associated with the mortgage. Mortgage rates are generally lower when the LTV is low.
This means that it is important to discuss every option with your mortgage advisor. If you are able to provide slightly more of a deposit or top up your equity to a slightly higher LTV, the amount of buy to let mortgage products that you have access to may be larger. The rates may also be lower, meaning your monthly payments could be lower too.
To learn more about buy to let mortgage rates, visit our buy to let mortgage rates and calculator page.
What is the maximum loan to value on a buy to let mortgage?
The maximum LTV on a standard buy to let mortgage is currently 85%. This is not a constant though, as sometimes lenders change their product offerings.
If you are looking for a specialist buy to let product, either for a HMO, MUB or LTD Company, the maximum LTV may be different.
- First time buyers or first time landlords: can borrow a maximum of 85% LTV on a standard buy to let property
- Experienced landlords: can borrow a maximum of 85% LTV on a standard buy to let property
- Maximum applicant age: Lenders that offer a maximum loan to value of 85% may limit maximum applicant age, ask your advisor about this.
- No minimum income: Where there are no minimum applicant income requirements, it means just that. Lenders will need to see some form of income (rental, pension, employed, self-employed, contracting, etc.) but they have not set a lower threshold as to the amount. Documentation will be required to validate the applicant’s income, identity and address.
- Portfolio landlords: if you have 4 or more properties you can borrow up to 80% loan to value with no maximum limit on the number of mortgaged properties in your portfolio, with some lenders.
- Multi-unit blocks or MUBs: can achieve up to 80% LTV, including a multi-unit freehold property on one title.
- Houses of multiple occupancy or HMOs: Can achieve a maximum borrowing of 80% LTV.
- Limited company buy to let mortgages: Can be secured at up to 85% LTV.
How much LTV do I need for a buy to let?
The minimum LTV that you need for a buy to let is 85%. This means that the minimum deposit you will need is 15%.
We have multiple lenders who offer products at this loan to value. However, this may mean that you only have access to a limited range of products and lenders, as not all offer buy to let mortgages at 85% LTV. Typically the lower the LTV, the more attractive the rates.
What is a good LTV rate?
While there is no ‘good’ or ‘bad’ LTV rate. The LTVs that you have access to will depend on your circumstances, the value of your property and the amount of deposit or equity you have available.
On the whole, lower LTV rates offer more benefits to the borrower and less risk to the lender. This is because the lender doesn’t have to invest as much of their own money into the property, reducing the risk to them.
As the borrower, putting down a larger deposit means you are more likely to be able to access lower interest rates with lower monthly payments.
What percentage deposit do I need for a buy to let mortgage?
The amount required will vary from one lender to another.
Products that require a 25%- 30% deposit or equity in the property are more common, as it is more beneficial for both parties. The lender has less risk and the landlord will have access to lower interest rates.
You can borrow at 80% loan to value and even up to a maximum of 85% on a buy to let mortgage.
Wider criteria relating to the security property, the rental income and you as a borrower will influence the deposit amount.
Can you get a buy to let mortgage with a small deposit?
Yes! The lowest deposit amount on the market at the moment is 15%. While this is not as low as some residential mortgages, it is still relatively small when compared with the LTV.
Some landlords may only be able to put down the minimum deposit for a property for various reasons. The more you can put down up-front, the cheaper your mortgage could be in the long term. This is because many of the high LTV products that we have access to at the moment have higher initial interest rates than their lower LTV counterparts.
Do you need 25% deposit for a buy to let?
No! The deposit you need for a buy to let property can be as little as 15%, or any greater amount.
The amount of deposit that you put down against the mortgage will change the products that you have access to. With a 25% deposit, the number of products begins to widen considerably in comparison to those products available with a 15-20% deposit. At 40-50% deposit, or more, you will usually find that the whole market is available to you. Lenders generally do not reduce their rates any further once you get to 50-60% loan to value.
Our team will happily discuss your plans to help you determine what the right amount of deposit or loan to value for your property is. To speak to a member of our team today, you can submit an enquiry, contact us on live chat or call the number at the top of the screen.
How much can I borrow for a buy to let mortgage?
The amount you can borrow for a buy to let mortgage will generally depend on the rental income your security property can achieve.
Your personal income may also be a factor. Each buy to let mortgage lender will have specific criteria that will need to be met, in order to allow you to access a particular product.