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50% Deposit Mortgages

If you are looking to purchase a new home, the more you can put down as a deposit, the better.

Raising half of the capital yourself means that you can access a low interest rate on your 50% Loan to Value Mortgage application.

Find out how these mortgages work.

What is a 50% Loan to Value Mortgage?

A 50% Loan to Value mortgage is where the mortgage applicant seeks to borrow half of the total funds needed to buy a house.

Alternatively, if they are a customer looking to remortgage, they may have already paid half of the total amount of their original mortgage loan.

Further, they may be using proceeds from a previous property sale, to use as a deposit for their next home. Either way, this is a good position for a borrower to be in.

Mortgage holders who have 50% or more home equity, or deposit funds, have access to very competitive mortgage interest rates. But be aware, lenders will still want to make money from your custom, so it is still worth doing research into lenders, before making an application for a 50% LTV mortgage.

Take a look at our guide to the Benefits of Getting Financial Advice, for more on mortgage brokers and how they may help you find the best deal.

Am I Eligible for a 50% LTV Mortgage?

• Obviously, you will need 50% of the total funds to buy a house, to apply for a 50% LTV mortgage.
• Alternatively, if you are looking to remortgage your existing property, you will need to have built up 50% equity in your home.
• You will need to pass a lender’s affordability checks. An assessment of your income, monthly expenditures, and other assets will be taken into consideration before a mortgage offer is made.
• You will need an adequate credit score in order to apply. The potential lender will look at your credit score and history of making payments on time, in making their decision to lend to you. To find out more about credit scores, read our Guide to Improving your Credit Rating.
• You will need to have the right to live and work in the United Kingdom and be over the age of 18. As is the case with the majority of mortgage lenders.

 How is a 50% LTV Mortgage Repaid?

You can apply for either a repayment mortgage or interest only mortgage. With a repayment mortgage, your monthly payments cover the capital and interest of the loan. Over time, your threshold of equity to mortgage will grow, meaning that you can try to remortgage in a few years’ time, to a 40% LTV mortgage.

Take a look at our Guide to Remortgaging for more information.

You can also apply for an interest-only mortgage. You will, however, need proof of a viable payment vehicle, so the lender can be assured that you can pay back the loan, in full, when the mortgage term ends.

In terms of interest payments, you can choose between, fixed interest rates, discount, capped, tracker or standard variable rates of interest. Find out more about how interest on loans is paid, by reading our Guide to Mortgage Types.

What are The Advantages of 50% Loan to Value Mortgages?

• Better Interest Rates – You will be able to access a low rate of interest, if you have a high amount of equity or deposit funds. You should however examine your prospective deals carefully, as some may have higher arrangement fees than others, or charge you a penalty for exiting early, or making overpayments.
• More Payment Options – With a 50% LTV mortgage, you may be eligible for interest-only deals, capped, tracker or fixed deals on interest. The more money you can pay up-front, the less you will have to pay towards the interest of your homeowner loan.

What are the Pitfalls of 50% LTV Mortgage?

Lender Checks – Despite owning more than 50% of your home, you will still need to pass a lender’s affordability check. If you have a bad credit history, you may be rejected as a borrower, despite your higher home equity/ deposit savings.

Let’s Look at a 50% LTV Example

Mike and Annie have lived in the same house for 10 years and are looking to move.  Unfortunately, their home has decreased in value and they hold 40% equity in their home. They have considered moving; however, a friend advised them to take some time out to modernise their home.  Mike and Annie are not in a hurry to move and like the idea of a project they can do cheaply themselves.

In a year’s time, they look to remortgage. The work carried out has added value to their home and they are now seeking a 50% LTV mortgage. The difference in interest rates, in going from 40% to 50% equity has made a huge difference. The small cost in works moved Mike and Annie to a new borrowing threshold, enabling them to choose from a wider range of lower cost mortgage deals. 

What are the Alternatives to 50% LTV Mortgages?

If you wish to pay off your mortgage faster, you may be able to overpay by 10% of the mortgage amount, per annum, without incurring a charge. However, this is not the case with all lenders. The quicker you can pay off your mortgage, the less you will pay in interest overall.

If you are looking for a 50% LTV mortgage and you need help finding the best deal for you, get in touch with an independent mortgage broker. They offer free advice and quotes.