High Loan to Value Mortgage

What is considered a high Loan to Value ratio?

Speaking specifically on the unregulated side, so Buy to Let properties, 75% is considered normal. Anything more than 75% would be a high Loan to Value product. 80% or 85% products would come under that category.

How do high Loan to Value mortgages on high value properties work?

It’s the same process as a normal Buy to Let, but the products and lenders do change. There aren’t as many people specialising in that high Loan to Value space. The associated risk for some lenders just doesn’t work. 

There are probably four or five providers offering high Loan to Value products, and only one of them is actually offering an 85% product at the moment [podcast recorded in May 2023]. 

You need to consider your deposit clearly if you’re going for an 80% or 85% mortgage on a purchase. If it’s on a remortgage, perhaps there’s been some reduction in the local area for the value of the property, so you need to consider long term how you plan to exit that mortgage. 

If you’re purchasing, you’re expecting some capital appreciation over the long term. If you want a repayment mortgage you will be paying the mortgage down. 

There might be a reason you need a high Loan to Value in the first place. We will always consider the market in the first instance, to assess the likelihood of you being stuck at that high Loan to Value – or worse.

Who can get a high Loan to Value mortgage?

In essence, everybody who qualifies for a normal Buy to Let mortgage. Affordability obviously is the key point. We’ve seen the market change. We’ve seen lenders’ rates change and affordability has been impacted by that. 

The payment term is also important. It’s how the lenders calculate their affordability for a Buy to Let. Five year products are the most favourable, especially through a limited company. But if you’re looking for a high Loan to Value product your property needs to have a very good yield to achieve those. 

We need to make sure that if you are looking for a high Loan to Value product, that your rental affordability will cover that loan.

How do I get a high Loan to Value mortgage?

Start by speaking to a broker. I don’t think any of the lenders currently offering high Loan to Value products offer them directly to the consumer – they are broker only. 

With the level of risk associated with those products, the advice from a broker is a very important part of this process. You need to understand the long-term risk for that product, the capital growth appreciation for the property, and the rental income yield over the long term.

It’s really important for a broker to place this type of case, because the underwriters will want answers to questions about how the client intends to make this into a successful business.

What else do we need to know about high Loan to Value products?

When I first speak to people who want a high Loan to Value product I always ask if they can increase their deposit. The rates do change dramatically when you jump into this category.  The actual mortgage rate itself can rise a lot. 

Arrangement fees are quite high across the market now, regardless of Loan to Value, but historically speaking, high Loan to Value products will always incur higher set up costs. So increasing your deposit will bring those down.

Your home may be repossessed if you do not keep up with your mortgage repayments. 

The Financial Conduct Authority does not regulate most Buy to Let Mortgages.