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Saving up enough of a deposit to secure that all-important mortgage is always a challenge, yet thanks to the abundance of 90% LTV mortgages on offer, you may be able to succeed sooner than you think.
Getting your first mortgage will likely be a long time in the making. First, you'll have to start saving, making sacrifices over the months and years to build your 10% mortgage deposit, before you can finally start looking for that first mortgage deal. You'll need to make sure that your credit score is up to scratch, too, because if not, no amount of savings will guarantee you'll be accepted.
Once you're confident you've got the savings and the credit score you need, it's time to get searching! Use our Best Buys or mortgage calculator to compare 90% LTV mortgages and find the right deal for you, but make sure to bear in mind these points:
Before you apply for a mortgage it's important to check your credit score.
Many people assume that 90% LTV mortgages are the preserve of first-time buyers, but this isn't always the case. Thanks to the rise of 95% LTV mortgages in recent years, many borrowers who took such a deal could find they're now coming to the end of their fixed rate term and need to remortgage, and in many cases they'll have paid off enough of the balance to move to a lower LTV bracket in the process. This means there's a growing market for remortgage loans at 90% LTV, and providers are accommodating.
Moving home with a 90% LTV mortgage is similar to having any other kind of mortgage, in that you'll need to speak to your lender to see what they advise. Generally, it shouldn't pose too many problems – most mortgages are portable, which means you should be able to transfer your 90% mortgage from the home you originally borrowed against to the new property.
Bear in mind that the lender will want the new property valued, and if it's worth more than your current home, you may have to borrow more to secure the mortgage against it, which could result in further affordability checks. You may also have to pay a transfer fee to port the mortgage, so make sure to factor this into your moving costs.
This will be a vital consideration whether you're getting your first mortgage, are remortgaging or want to move home, and one that's often based on personal preference, but it's important to choose wisely. Variable rate mortgages are often cheaper than their fixed rate counterparts but remember that these rates can vary according to things like base rate movement – if you think base rate will rise in the near future, it could be wise to hedge your bets and opt for a fixed rate 90% LTV mortgage, guaranteeing your repayments for the long term.
Start the process by looking at our chart of the best 90% LTV mortgages available, or for a more personalised overview, use our mortgage calculator to get a tailored list of the deals that could be right for you. Just make sure to compare all features of the 90% LTV mortgage loans presented to you, rather than focusing on rate alone, to ensure you'll be left with the deal that's the most cost-effective for the long-term.
If you're still not sure what kind of mortgage is right for you, you could consider using a mortgage broker. Not only can they provide valuable advice but they may also have access to 90% LTV mortgage deals that are not available directly on the Moneyfacts charts.
Some of the most frequently asked questions related to 90% LTV mortgages:
This is another tricky one to answer as the market is constantly changing, but as a general rule, securing a 90% LTV mortgage may be slightly more difficult on a new build than an older home. As it stands, most mortgage providers won't lend at more than 85% LTV for a new build house, and this could even fall to 75% for a new build flat, so you may need to do a bit of digging to secure a deal to suit.
This is where heading to a broker or specialist financial adviser can come in, as they'll be able to help you narrow down the options, and if you're struggling, you may want to consider the Help to Buy equity loan scheme. This can allow you to secure a lower LTV mortgage with the help of a Government loan, and you'd still only put down a 10% or even 5% deposit.
The risks of 10% deposit mortgages are similar to those for any other kind of loan, with the key one being the risk of default. Lenders view higher LTV lending as riskier given the size of the loan and the resulting repayments, which is why it's so important to make certain that you can afford the repayments – both now and should rates rise in the future – and why lenders are so strict with their criteria.
Then there's the risk of negative equity. If the value of your home plummeted by more than 10%, you could end up owning more in a mortgage than your home's worth, potentially leaving you a mortgage prisoner as it'd be incredibly difficult to remortgage. This is why making overpayments is often recommended if you can afford to, giving you the chance to reduce interest payments and even remortgage to a lower LTV.
Even the cheapest 90% LTV mortgage rate will typically be higher than that for lower LTVs, for the same reason as above – the risk associated with this form of lending. Providers are giving you a hefty amount of money in relation to the value of the property, which puts their loan at greater risk should you default, and as a result they're asking you to pay more for the privilege.
As a rule, no, at least not if you're a first-time landlord. Lenders rarely offer 90% LTV buy-to-let mortgages, and if they do, you'll typically need to have a good track record with that lender, which may include a portfolio of mortgaged (and profitable) properties with them already.
At the very least, you'll need to already have a mortgaged property – first-time buyers will be highly unlikely to secure a buy-to-let 90% LTV deal – but even then it could be tricky. This means anyone searching for a 90% LTV buy-to-let deal will have to go down a more bespoke route; which means speak to your lender, a broker or financial adviser, who will be able to give you some tailored answers.