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.
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.
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.
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.
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.
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.
My biggest concern was finding a mortgage with no strings attached. My options were clearly explained to me and I felt confident about the decision. Alice Silverman, Stoke-on-Trent
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THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
IF YOU ARE THINKING OF CONSOLIDATION EXISTING BORROWING YOU SHOULD BE AWARE THAT YOU MAY BE EXTENDING THE TERMS OF THE DEBT AND INCREASING THE TOTAL AMOUNT YOU REPAY.
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