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100% LTV Mortgages FAQ
A 100% Loan to Value (LTV) mortgage covers the entire purchase price of your new home. In other words, this means that you don't need to supply any deposit. 100% LTV mortgages are ideal for those with limited savings, but they're not always easy to access.
What does LTV mean?
LTV means loan-to-value. It's a term used to describe the amount of the loan you're hoping to receive in relation to the value of the property you intend to purchase. LTV is a percentage figure that represents the percentage of the property that's mortgaged, against the percentage that is already a part of your equity. A mortgage of 100% LTV will mean that you have a loan that equals 100% of your property value. Essentially, when you first buy your home, you will have no equity in it and the entire property will be mortgaged.
Who can access 100% LTV mortgages?
100% LTV mortgages require the lender to take on substantial risk, which means they need some form of security in place in case you are unable to make repayments. Lenders will often only make 100% LTV mortgages available to those with guarantors who can offer additional security. In certain cases, 100% LTV mortgages can be obtained by people who already have a mortgage with a specific lender, and are able to place the equity in their existing home up as a security.
What is a guarantor?
A guarantor is often essential for a 100% LTV mortgage. Guarantors are people who can agree to back up your loan, and will be willing to step in and make payments if you cannot. Guarantors need to be aged between 18 and 75, and they must have a good credit history.
What are the benefits of 100% LTV mortgages?
The most obvious benefit of a 100% LTV mortgage is that it allows would-be homeowners to purchase property without having to save for a deposit. In the case of 100% LTV mortgages that require the use of a guarantor, these solutions can also provide alternatives to gifted deposits for family members that want to assist their loved ones in getting onto the property ladder.
What are the risks of 100% LTV mortgages?
The biggest risk with taking out a 100% LTV mortgage is the potential for house prices to fall. If the value of your home decreases, this could force you into negative equity, meaning that you owe your lender more than your property is worth. Being in negative equity can make it very difficult for homeowners to remortgage or move to a new house, leaving you tied into repayments on a property that is falling in value.
Is my credit record important for 100% LTV mortgages?
For a 100% LTV mortgage your credit record will be important as it shows that you can keep up with repayments on your loan. However, the credit history of your guarantor may be even more important to some lenders.
Can I get a 100% LTV buy to let mortgage?
No, a buy to let mortgage will always require a deposit. Most lenders will request a deposit of at least 20% on a property that will not be used as your primary residence.
Are there low-deposit alternatives to 100% LTV mortgages?
Considering the risks associated with 100% LTV mortgages, it may be useful to consider alternatives. For instance, you might look at buyer schemes offered by the government, such as shared ownership or Help to Buy, which can reduce the amount you need to offer in deposit. With these schemes, you will still need to raise some deposit, but the amount required can be as low as 5% for first-time buyers.
Alternatively, you could consider asking your family to help you approach the housing ladder with a gifted deposit, which is where one of your family members simply gives you the money you need. Some lenders will have limits on the amount of deposit that can be gifted, and your benefactor might be asked to sign a declaration stating that the gifted money does not need to be repaid.