Leanne Macardle

Leanne Macardle

Editor
Published: 29/01/2019

At a glance

  • The LTV is the percentage of the mortgage you need to borrow against the total value of the property you are buying.
  • 95% LTV mortgages for first-time buyers can be a useful way to get on the property ladder as they require only 5% deposit.
  • These types of lower deposit mortgages generally have higher interest rates than the lower LTV alternatives.
  • Our tables below allow you to compare 95% LTV mortgages, so you can understand how much you would pay each month and any fees connected to applying for the mortgage.
  • Don't forget the additional upfront costs of buying a home, such as stamp duty and any solicitor's fees.

What does LTV mean?

The LTV (or loan-to-value) refers to the amount of loan you’re looking for in relation to the overall value of your property. The percentage figure is used to reflect the proportion of the property that’s mortgaged and the amount that’s yours (known as your “equity”).

A mortgage at 95% LTV will result in a loan that’s worth 95% of the value of your property – meaning that 95% of the property will be mortgaged, and you’ll have 5% equity.

The LTV also determines the amount of deposit you’ll need. If you applied for a mortgage at 95% LTV, you’d need to put down a 5% deposit, while if you were seeking a mortgage at a lower or higher LTV, the requirements would alter. The LTV you need will ultimately be based on your circumstances, the price of the property, and the amount of deposit you’ve been able to save.

Pros and cons

  • Low deposit. You only need a 5% deposit with a 95% LTV mortgage.
  • Potential savings each month. You may find that your monthly mortgage repayments are lower than any amount you could currently be paying for rent. However, you should remember that your total costs with interest over the term of your mortgage may be more expensive.
  • More choice. Lenders are increasingly offering 95% deals to meet first-time buyer mortgage demand.
  • Higher interest rates. Although the rates for 95% mortgages have fallen, they're still higher than the lower LTV alternatives.
  • Strict lending criteria. You'll need to make sure you have reviewed your affordability before applying for this mortgage.
  • Be careful of potential negative equity. If house price conditions change, and values fall, this could result in your house value dropping at a greater rate than you are paying off your mortgage.

Mortgage calculator

Our mortgage calculator helps you to see how much your mortgage might cost you each month.

Our how much can I borrow calculator gives you a range of how much a lender might consider lending you under a mortgage. This calculation is only an indication only.

Read our How much can I borrow for a mortgage guide to find out more about what can impact your potential sum of borrowing.

Moneyfacts tip

Moneyfacts tip Leanne Macardle

You should consider smaller banks and building societies when looking for the best 95% mortgage deals as they may have more competitive rates and offer flexibility with their mortgage underwriting.

Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

keys in door lock

At a glance

  • The LTV is the percentage of the mortgage you need to borrow against the total value of the property you are buying.
  • 95% LTV mortgages for first-time buyers can be a useful way to get on the property ladder as they require only 5% deposit.
  • These types of lower deposit mortgages generally have higher interest rates than the lower LTV alternatives.
  • Our tables below allow you to compare 95% LTV mortgages, so you can understand how much you would pay each month and any fees connected to applying for the mortgage.
  • Don't forget the additional upfront costs of buying a home, such as stamp duty and any solicitor's fees.

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