If you’re looking to purchase a high-value property, you’re likely already wondering what deposit size you need in order to secure a mortgage. Borrowers tend to think in terms of deposit size, whereas banks are thinking about the the loan to value (LTV). Expressed as a percentage, the LTV is the size of mortgage a lender will offer you in relation to the value of the property you are purchasing or refinancing. For example, if you want to buy a million pound property, you could have a £250,000 deposit and a £750,000 mortgage, which would be a 74% LTV mortgage.
The higher the LTV, the higher the risk from the lender’s perspective. Historically, it was possible to secure very high LTV mortgages with relative ease; some lenders were even prepared to offer 100% LTV mortgages. However, post the financial crash, lenders understandably became much more conservative in their lending. To secure a large loan now, you’ll very likely need a significant down payment or deposit to achieve a good mortgage rate.
On the high street, LTVs can range up to 95%. However, it’s important to note that mortgages offered at such a high LTV are typically only offered for smaller loan sizes. A lender taking a £10,000 deposit on a £200,000 property is understandably far less of a risk than a lender taking a £100,000 deposit on a £2million home. If you are looking for a mortgage over £1milllion, for example, you are likely to find that the LTV offered to you will be capped.
What loan to value can private banks offer?
If you’re looking for million pound mortgage with a high LTV, a private bank is likely to be the most suitable lender for you. As standard, private banks can offer LTVs of up to 65%. With a good broker on board to help negotiate on your behalf, it’s possible to source mortgages over £1million in the 75% LTV bracket. In certain circumstances—and for clients fitting a very specific profile—they can go higher than this; for example, we work with a lender who can offer 85% LTV on mortgages up to £15million, but only for clients with a minimum income of £300,000 a year.
What will affect the lender’s decision on what loan to value to offer?
Many clients are keen to secure a million pound mortgage with a low deposit size, but lenders will not offer high LTV mortgages to clients they perceive as a risk. The property in question will also have an impact on the lender’s willingness to extend the LTV: if the lender judges the property is a good investment in a decent area, they will be more inclined to take the risk as it is far less likely the property will lose a significant amount of value.